RBA’s Harper sees delta driving unemployment rate back above 5%

Bloomberg reports that Reserve Bank of Australia board member Ian Harper said he expects the jobless rate to climb back above 5% and to see a “much bigger” fall in participation as renewed lockdowns along the nation’s east coast flow through to the labor market.

In July, unemployment actually fell to 4.6% from 4.9% and the economy managed to add jobs. But the report also showed hours worked fell and under-employment rose.

“Those numbers haven’t picked up the full impact” of the curbs, said Harper. “There are likely to be more job losses and more people leaving the labor market in the period ahead.”

Harper said the economy seems to be tracking between the central bank’s base case and downside scenarios, as set out in its quarterly update of economic forecasts released two weeks ago.

Harper’s confidence in a quick rebound is partly because the hit to the economy is on the supply side, while evidence from Australia and abroad shows demand returns rapidly when restrictions are lifted. Still, he acknowledged that the delta variant of coronavirus is different than what the country faced last year.