Employment Figures Put Economy on Firm Footing
Labour market figures published by the CSO last week for the final quarter of 2014 contained further good news on the Irish economy,writes Oliver Mangan Chief Economist at AIB.
The data show the recovery in the economy is continuing to generate solid job growth with falling unemployment. It is also beginning to result in a pick-up in wages.
Employment rose by 10,000 or 0.5% in quarter four, following a rise of 11,000 or 0.6% in the third quarter. On a year-on-year basis, employment was up by almost 30,000, or 1.5%. Full-time employment actually rose by 40,000 or 2.7% over the past year, with a decrease of 10,000 in part-time jobs. This shows that as the economic recovery gathers strength, more and more people are able to move out of part-time employment and into full-time jobs.
In another positive development, the job gains were broad-based, with employment rising in 11 of the 14 sectors in the CSO survey. Construction saw the biggest employment gain, with jobs growth of 13,000 or 12.6% in the year. Meanwhile, employment in finance, insurance, and real estate activity rose by almost 5,000, while the number employed in the retail and wholesale trade rose by over 6,000.
Employment has now risen for nine consecutive quarters. One area where employment continues to shrink is the public sector, although it now appears to be close to stabilising. The numbers working in the public sector fell by a further 1,500, or 0.4%, in the past year.
Actual employment growth in 2014 would appear to be even stronger than the above figures suggest. There seems to have been some issues around sampling methodology that have caused distortions in numbers being recorded as employed in agriculture in recent years.
According to the CSO data, employment in agriculture fell by 11,000, or 9.3%, during 2014, having risen by 27,000 or 30% over the previous year. Such big swings in agricultural employment seem unlikely. If we exclude agriculture, employment rose by 40,000, or 2.2%, during 2014, up from 33,000, or 1.9%, in 2013.
The total number at work is now at its highest level since end 2009. Employment has risen by almost 100,000, or over 5%, to 1.93m from its low point in mid-2012. However, it is still 225,000 below the peak reached in the opening quarter of 2008, largely because of the much lower numbers working in construction.
The steady rise in employment over the past couple of years, combined with emigration, has resulted in a sharp fall in unemployment. The unemployment rate had dropped to 10.4% by December, down from 12.2% at end-2013 and a peak unemployment rate of 15.1% reached in early 2012.
The CSO figures show the number of unemployed stood at 225,000 in the final quarter of 2014, down from 266,000 a year earlier and a peak of 327,000 at the start of 2012. Thus, unemployment fell by over 40,000 last year and has declined by over 100,000 from its peak.
Based on recent trends, the unemployment rate should fall below 10% in the coming months and drop to under 9% by mid-2016. However, while now comfortably below the eurozone jobless rate of 11.2%, Ireland still has some way to go before its jobless rate drops to US and UK levels of less than 6%.
Finally, CSO data last week also showed the improving labour market conditions are leading to a pick-up in workers’ earnings. This reflects both a rise in hourly wage rates and an increase in the number of hours worked, especially in the private sector.
Average weekly earnings rose by 2.3% year-on-year in the final quarter of 2014. Most sectors showed reasonable wage growth apart from the public sector, which recorded a rise of just 0.3%. Rising incomes will help put the economic recovery on a firmer footing, boosting consumer spending in particular.
This week’s Inflation Report from the BoE will be interesting reading in this regard.
Source: Irish Examiner March 3rd 2015