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Chief economist update: Honey, COVID-19 got me sacked

With most of us, Australians all, only just emerging from isolation and many businesses still locked down or operating with limitations, the rising rate of unemployment - from 5.2% in March to 6.4% in April to 7.1% in May - doesn't surprise.

In fact, according to the Australian Bureau of Statistics (ABS): "Had the increase in the number of people who were not in the labour force between April and May (142,000) been a further increase in unemployment (that is, if they had been actively looking for work and been available to work) then the number of unemployed people would have increased to around 1.1 million people (and an unemployment rate of around 8.1%)."

"Looking at the cumulative change between March and May, had the increase in the number of people who were not in the labour force (623,600) been a further increase in unemployment, then the number of unemployed people would have increased to around 1.55 million people (and an unemployment rate of around 11.3%)."

So far this year, 807,400 Australians have been given pink slips - 286,500 full-time and 520,900 part-time.

It would have been much worse had it not been for the JobKeeper and JobSeeker initiatives.

The RBA forecast the unemployment rate to reach 10% in June before settling at 9% by end-2020. The latest OECD (June report) was kinder, predicting the country's jobless rate to rise to 7.4% this year (under a single covid hit scenario) or 7.6% (under a double-hit).

The gradual relaxation of social interaction and loosening of lockdown restrictions should improve demand for labour going forward.

However, this is counter-balanced by the real and present danger posed by a second wave of infections.

One that's underscored by the resurgence of coronavirus infections in Beijing and Iran recently, and one that's brought closer to home by rising cases (mostly) in Victoria and New South Wales.

According to the ABC: "The biggest rise in new cases has come from Victoria. The state yesterday recorded 18 new coronavirus cases, which Premier Daniel Andrews said served as a reminder the pandemic was "far from over".

"Since Monday, New South Wales has recorded nine new cases, and Queensland and Western Australia have both confirmed one new case each."

No prizes for guessing, but if this trend continues (after the relaxation of lockdown restrictions), lockdowns and social interaction restrictions will have to be reinstated.

The good news is that both the Australian central bank (it's prepared to scale-up its government purchases again and will do whatever is necessary to ensure bond markets remain functional) and the Federal government are on the ball (it's set to increase the JobSeeker payment).

"We will not rest. We are working with some of the biggest economic challenges this country has ever faced and our government is working day and night to get the balance right, to get the right supports in place," Morrison said.

Read our full COVID-19 news coverage and analysis here.

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