The unemployment rate has dropped to 3.4 per cent, its lowest rate in 48 years.

The latest figures from the Australian Bureau of Statistics released on Thursday show Australia had more positions open than jobseekers to fill them last month.

“The fall in unemployment in July reflects an increasingly tight labour market, including high job vacancies and ongoing labour shortages, resulting in the lowest unemployment rate since August 1974,” the bureau’s head of labour statistics Bjorn Jarvis said.

The July figures follow a sharper than expected drop in the jobless rate in June.

They also reveal a fall in employment by 41,000 in July, which was below expectations of a 25,000 increase.

“Despite the fall in employment, all signs point to a very tight labour market,” BIS Oxford Economics head of macroeconomics forecasting Sean Langcake said.

The lower unemployment rate was partly driven by the fall in the participation rate, he said, with COVID, school holidays and floods on the east coast dampening participation in the workforce.

“To the extent that this has contributed to the fall in employment in the month, we can expect a rebound in the coming months,” he said.

AMP Australia senior economist Diana Mousina said the weakness in employment growth was likely overstated and would be stronger in August.

She also said a rate rise from the Reserve Bank of Australia was inevitable following the wages and labour figures, although she was uncertain how large the next hike would be.

Australian Chamber of Commerce and Industry head Andrew McKellar said the bulk of jobs created this year were “good, full-time, secure jobs”.

“In the past year we’ve added just under 400,000 jobs – around 398,000 were created – with 392,000 of those full time.”

Mr McKellar said the focus should be on increasing workforce participation and addressing labour and skills shortages.

Australian Council of Social Service acting CEO Edwina MacDonald said efforts should be concentrated on increasing workforce participation including the long-term unemployed, people with disabilities and older Australians.

“Over the past 50 years, full employment has taken a back seat to efforts to curb inflation using the blunt instruments of high interest rates and government spending cuts,” she said.

The ABS also released average weekly data on Thursday showing the average weekly earnings from wages and salaries rose by 1.9 per cent in the year to May, to $1769.80.

– AAP