The unemployment rate unexpectedly dropped to a 13-year low of 4.6 per cent in July when most economists had tipped an increase with the coronavirus crisis having worsened in recent months.

The jobless rate was 4.9 per cent in June.

However, the Australian Bureau of Statistics said the result was distorted by large changes in the NSW and Victorian labour markets, the nation’s most populous states.

ABS head of labour statistics Bjorn Jarvis said there was a big employment fall of 36,000, or 0.9 per cent, in NSW employment and a 7 per cent drop in hours worked in the state.

“These changes offset increases in employment and hours in Victoria,” Mr Jarvis said.

Victorian employment rose by 0.5 per cent, while hours worked jumped by 9.7 per cent, recovering from an 8.4 per cent fall during its June lockdown.

Mr Jarvis said the July data coincided with the early weeks of the greater Sydney lockdown, increased restrictions in other parts of NSW, and a series of changes in restrictions in other parts of the country.

Overall, the number of people employed in July rose by 2200 across the nation.

Full-time employment decreased by 4200, while the number of people in part-time jobs rose by 6400.

Economists had expected the jobless rate to rise to 5 per cent in July, due to the impact of the early stages of the third wave of the coronavirus pandemic.

BIS Oxford Economics chief economist Sarah Hunter expected the jobs figures in August and September would deteriorate.

“Overall, employment and GDP are set to record a substantial contraction in the September quarter,” Dr Hunter said.

“Momentum will not return until the government’s vaccination targets are reached and restrictions can be materially eased – it will likely be 2022 before a sustained recovery is underway.”

Economists have been anticipating a sharp contraction in the economy for some weeks, which could extend into the early months of the December quarter.

“Obviously, we desperately hope that we can avoid the second recession in two years,” shadow treasurer Jim Chalmers told Sky News on Thursday.

“I think the fact that the treasurer himself cannot rule out another recession under this government is another indication of their failures on vaccines, and purpose-built quarantine, and JobKeeper as well.”

Asked on Wednesday if Australia could avoid another recession, Prime Minister Scott Morrison said he remained confident that once the country was vaccinated and could reopen, the economy would rebound.

A technical recession is classified as two consecutive quarters of economic contraction.

-AAP