Australia's unemployment rate has dropped again, to the lowest level in almost 13 years, but a steep fall in hours worked last month paints a more accurate picture of the economic pain resulting from COVID lockdowns.

The official ABS figures show unemployment dipped from 4.6 per cent in July to 4.5 per cent in August, even though 146,300 jobs were lost.

The reason is that many people gave up looking for work, given the continuing COVID lockdowns in New South Wales, Victoria and the ACT, with the participation rate diving from 66 to 65.2 per cent.

"Beyond people losing their jobs, we have seen unemployed people drop out of the labour force, given how difficult it is to actively look for work and be available for work during lockdowns," explained Bjorn Jarvis, who heads labour statistics at the ABS.

"This has also coincided with a temporary pause in mutual obligations for jobseekers living in lockdown areas."

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Slump in hours worked shows the lockdown pain

Hours worked fell 3.7 per cent, with underemployment rising a full percentage point to 9.3 per cent.

Jobs website Indeed's Asia-Pacific economist Callam Pickering said these were more relevant measures of the economic damage during the pandemic.

"The Australian labour market took a beating in August," Mr Pickering observed.

"That pain will continue until both Sydney and Melbourne are able to ease restrictions.

Hairdresser Shane Couzens has one such job, and has not cut anyone's hair for months after Sydney locked down.

Mr Couzens used to work anywhere from 30 to 45 hours a week, but now he is spending his days with his partner cooking, making Lego and listening to vinyls.

While Mr Couzens has not lost his job, he is not working. But he is also not looking for work, so he is not counted as "unemployed".

Instead, he is one of the 211,188 fewer people in the labour force compared to the June survey, taken before the latest lockdowns began.

"There was a little bit of, 'Hee hee, isn't this funny to not go to work?' for about three days, and then the reality set in, and it was more like, 'Wow, this could really go on for quite a period of time,'" Mr Couzens told The Business.

Mr Couzens and his partner Peter Everson, who owns his own hair salon, are both unable to work during the lockdown.

Mr Couzens, who has been a hairdresser for 32 years, is receiving the $750 COVID disaster payment, while Mr Everson's business is getting business support from the New South Wales government.

"We wouldn't be surviving otherwise, I don't know what would happen, we'd be out of the house and probably living with family or something," Mr Couzens said.

NSW loses 210,000 jobs after first month of lockdown

The drop was, unsurprisingly, concentrated in New South Wales, which was into its second month of lockdown when the survey these figures are based on was conducted.

"In August, there were big falls in New South Wales in both employment (-173,000) and hours worked (-6.5 per cent)," Mr Jarvis observed.

Freelance actor Adriane White is one of the many Sydney residents who have seen their hours slashed.

Before the latest lockdown, she used to work 40 to 50 hours a week across three jobs.

Her main job was as an usher with the Sydney Theatre Company (STC), but she also had hours as a part-time receptionist at a yoga studio and at a family friend's real estate agency.

"I would often go from one job to another, maybe work afternoons and then into evenings," Ms White said.

Her arts jobs have disappeared just ahead of a busy season for the STC that would have boosted her hours, and the yoga studio is also shut.

"We expected we'd be down for two weeks, three weeks, and we got extended like everyone else," Ms White told The Business.

She has held on to her real estate job, but that only gives her about five hours of work a week.

"I still have lost 20-plus hours of work a week, regardless of whether or not I haven't lost this five," she said.

But it also means she is not considered unemployed by the ABS, falling instead into the swelling ranks of the underemployed.

Ms White said not knowing what her future held had affected her mental health.

"I'd like to know how am I going to be able to go back to work and do I still have access to support payments if I can't go back to work through no fault of my own."

It is obviously not just Sydneysiders suffering. Melbourne is enduring another long lockdown, and there have been shorter shutdowns in other states and territories.

Mr Jarvis said other states and territories that were in lockdown for part or all of the survey period in early August also saw big falls in hours worked, including Victoria (-3.4 per cent), Queensland (-5.3 per cent) and the ACT (-2.5 per cent).