Leading economist Brad Olsen predicts unemployment rate to drop further

A leading economist is predicting the unemployment rate to drop further when the latest figures are released on Wednesday morning.

The unemployment rate for the December 2021 quarter dropped to a record low of 3.2 percent, the lowest rate since 1986 when records began.

Infometrics principal economist Brad Olsen told AM on Wednesday he is expecting the unemployment rate to reach new record lows.

"We know just how tight the labour market is at the moment. Infometrics is expecting the unemployment rate to drop to 3.1 percent, but just about every forecaster I've seen is expecting it to go down," he told AM Early host Bernadine Oliver-Kerby.

"Realistically you get a little bit worried when everyone is so forthright in their views that you are going to go down. We know that at the start of the pandemic, we saw the unemployment rate fall when we all thought it would go up."

Olsen said Infometrics estimates show that at the peak of the Omicron outbreak, 300,000 people couldn't work because of COVID-19.

"We know that the first three months of this year have been relatively volatile for a number of businesses with a lot of people working but at different points unable to get into the office or complete all of their roles," he said.

"We know a number of sectors have said 'I would love to have more people on but they are all off sick and I can't quite do as much work' a lot of that is helping to fuel inflation."

However, he told AM it may not be an accurate gauge of those unemployed.

"Looking down through the numbers, what we do think there has been is more people getting into work but also people who haven't been able to go out there and look for and be available to work and get into a job, those people won't be counted as unemployed," he said. 

"So I think with the Omicron effect, as well as a really tight labour market, the only direction realistically for the unemployment rate is for it to go further down."

Watch the full interview with Brad Olsen above.