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Large fall Irish in jobless rate may stall, experts warn

Unemployment may slip below 8% just ahead of the next general election, but the dramatic improvement is likely to stall because the huge numbers on Government activation programmes will likely keep the jobless rate at an elevated level, experts have warned.

The warning comes after the CSO published figures that showed Ireland was creating jobs at a faster pace than any other developed economy in the world.

The figures show employment rose in the first three months this year for the 10th successive quarter, a continuing recovery from the worst of the jobs crisis.

Unemployment, which peaked at 15.1% in February 2012, has now fallen below 10% for the first time since the crisis began, according to the CSO’s Quarterly National Household Survey.

Although starting from a low base, the first quarter also showed a welcome increase in construction jobs, with 19,600 more people working in the building industry from a year earlier. Banking and other property-related sectors such as jobs in real estate activities also recorded large increases.

Unemployment has fallen here faster than any other economy in the Organisation of Co-operation and Development area, and Ireland is increasing employment at twice the rate of any other country in the eurozone, said Conall Mac Coille, chief economist at Davy Stockbrokers.

He said it was now “not unthinkable” that unemployment could slip below 8% by early next year from 9.8% currently, if the rate of improvement were to be maintained.

However, the CSO figures, which showed a significant rise in the number of people leaving the labour force, may put a brake on the large falls in unemployment. This is due to the number of people who opted to take college courses during the recession and the large numbers participating on Government training courses, and not counted on any unemployment register, eventually returning to employment.

The number of people of working age participating in the labour force — the so-called participation rate —has fallen to 59.4%, the lowest rate since 1999, Mr Mac Coille said.

Government figures published last month showed that there were 89,704 people on employment or “activation” training programmes, an increase of 4,285 in the year. The number on the programmes has soared by about 31,400 since the eve of the crash, in early 2007, and is equivalent to the population of Galway City or Derry City.

Austin Hughes, chief economist at KBC Bank Ireland, said the jobs data suggested that the economic upswing was gaining momentum, with an increasing shift to full-time jobs. However, consumer-focused employers were still cautious, showing “the uneven nature of the turn in consumer spending and a cautious approach to hiring”, he said.

Merrion Capital chief economist Alan McQuaid said emigration had helped to stop unemployment from reaching higher levels, but outward migration had now declined.

Goodbody Stockbrokers economist Juliet Tennent said the figures showed that the employment gains were broadly based, with all areas except the western region recording employment rises. However, she said that “considerable slack remains in the labour market, and there is further to go to normalisation”.

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