Australia's unemployment rate rose to a two-decade high in June as a gradual easing in coronavirus-related lockdowns encouraged more people to look for work.
Unemployment rose to a seasonally-adjusted 7.4 per cent, figures from the Australian Bureau of Statistics showed on Thursday, with the number of unemployed people rising by another 69,300 during the month.
Economists had, on average, expected the unemployment rate to jump to 7.3 per cent.
The Australian economy has lost close to a million jobs in total since social distancing measures were imposed from late-March which led to widespread business closures.
Unemployment had been at 5.2 per cent in March before the COVID crisis.
While steep, the rise in unemployment rate masks the extent of the impact of coronavirus, given the ABS data's focus on including people looking for work.
That was reflected in the unemployment rate rising in June despite 210,800 jobs returning to the economy during the month. This included part-time jobs rising by 249,000, while full-time work roles decreased by 38,100.
"Although seemingly contradictory, as expected the unemployment rate rose as a result of the reintroduction of the requirement to look for work to be eligible for JobSeeker," BIS Oxford Economics chief economist Dr Sarah Hunter said.
She expects the unemployment rate to rise further in July as more people return to actively looking for work.
The participation rate - or the percentage of people looking for work - rose by 1.3 percentage points to 64 per cent, reflecting the gradual recovery in job market conditions.
The underemployment rate slipped 1.4 percentage points to 11.7 per cent and the under-utilisation rate - or the rate of people looking for more working hours - decreased 1.0 percentage points to 19.1 per cent.
But economists think these numbers are still understating the true extent of joblessness across the economy. They also believe some of the impact has been capped due to the federal government's JobKeeper wage subsidy program under which businesses keep workers on their books during the crisis with a fortnightly payment of $1500.
Earlier this month, federal Treasurer Josh Frydenberg put the effective unemployment rate at 13.3 per cent.
All states and territories, except the Northern Territory, recorded an increase in employment during the month.
South Australia had the highest unemployment rate of 8.8 per cent, followed by Western Australia at 8.7 per cent, while Queensland recorded 7.7 per cent.
Victoria's jobless rate eased to 7.5 per cent, while New South Wales and Tasmania had the lowest unemployment rate at 6.9 per cent.
Economists believe while the data shows encouraging signs of an economic recovery, challenges remain.
"With Victoria entering renewed lockdown and accounting for 26 per cent of total employment, some setback in July and August is likely, tempering the labour market recovery," RBC Capital Markets strategist Su-Lin Ong said.
"While the worst is likely behind us in terms of job shedding, recouping jobs lost will be a long process, especially if growth is modest as we anticipate."