The rapid decline in the unemployment rate to a decade low looks set to come to an end, a casualty of multiple virus restrictions across the country in recent weeks.
The jobless rate has dropped for eight straight months, from 6.9 per cent in October last year to 4.9 per cent June.
However it is now set to spike above five per cent again in coming months with the economy slumping into a downturn.
The Australian Bureau of Statistics will release the crucial labour force report for July on Thursday.
Economists’ forecasts centre on a rise in the jobless rate to 5.0 per cent in July but with further increases to 5.5 per cent over the next few months.
AMP Capital chief economist Shane Oliver is expecting a 50,000 fall in the number of people employed in July and mainly in NSW, which broadened its Greater Sydney lockdown to across the state on Saturday.
He is expecting a much bigger impact showing up in August.
“Ultimately employment is expected to fall by around 300,000,” Dr Oliver said.
However the Reserve Bank of Australia expects as vaccination rates increase and lockdowns become less necessary, the unemployment rate will resume its downtrend, reaching 4.25 per cent by end 2022 and four per cent a year later.
The RBA sees a low unemployment rate and higher wages growth as key factors to bringing back inflation to some normality and sustainably between two and three per cent target, which would allow it to lift interest rates from emergency levels.
It does not expect these circumstances to be met before 2024.
Wage growth figures due this week will confirm there is still a long way to go before meeting the RBA’s desired level of three per cent.
The wage price index for the June quarter – a gauge used by the RBA and Treasury to measure wage growth – is released on Wednesday.
Economists expect wages to have grown 0.6 per cent in the June quarter for an annual rate of 1.9 per cent, up from 1.5 per as of the March quarter.
The RBA will release minutes of its August 3 board meeting on Tuesday, although they are unlikely to offer up much new.
Since that gathering, it has released its quarterly statement on monetary policy and governor Philip Lowe has appeared for his six monthly grilling before federal politicians.
Meanwhile, Australia shares look set for a soft opening on Monday after Wall Street finished up on Friday with the smallest of gains.
The US S&P 500 rose 7.17 points to 4,468, the Dow Jones Industrial Average added 15.53 points to 35,515.38, and the Nasdaq picked up 6.64 points to 14,822.90.
Australian share futures were nine points lower at 7536.0.
It will be a modest retreat from Friday’s record close with the benchmark S&P/ASX200 index having ended 40.7 points, or 0.54 per cent, higher at 7628.9 on expectations of further bumper earnings results this week.
Results include JB HiFi on Monday, BHP on Tuesday, Coles and CSL on Wednesday.
By Colin Brinsden, AAP Economics and Business Correspondent in Canberra
