Finally, jobs news worth shouting from the rooftops
THIS column does not go in for hyperbole. Nor, hopefully, does it suffer from the sort of optimism bias that causes some analysts always to view economic prospects through rose-tinted glasses. But when there is good news, it is worth flagging. And the continued good news on the jobs front is not far off miraculous and worth flagging from the rooftops, particularly given how much bad news there has been for so long.
Yesterday, statisticians revealed that employment continued to surge in the final three months of last year, with the numbers at work rising by around 1,000 a week in October, November and December. This was the fifth consecutive quarter of employment growth, resulting in jobs levels in the economy pushing back through the 1.9 million threshold. Since the low point in employment in the third quarter of 2012, more than 70,000 net jobs have been created on a seasonally adjusted basis. Put another way, the employment gains over the past 15 months mean that all the job losses over the previous 30 months have been clawed back.
Again, and without wishing to sound in any way hyperbolic, this performance is quite simply phenomenal. Perhaps the best way to show just how spectacular the performance has been is to compare Irish jobs growth with the rest of EU. As the first chart shows, the numbers at work increased by more than any other country among the 28 members of the EU in the 12 months to the third quarter of last year (the most up to date bloc-wide figures).
It is very unusual for an economy that is suffering from so many serious debt problems and a dysfunctional banking system to experience such a sudden turnaround in its labour market. Making it all the more remarkable still is that during the past year-and-a-half the public sector has been in downsizing mode and most of the rest of the continent was in recession, as reflected in the decline of total employment across the 28-member union in the 12 months to the third quarter of last year.
For a number of reasons it is almost impossible to understate the importance of the jobs numbers as an indicator of economic health and in terms of the significance of the historically unusual period of recent jobs growth. First, these numbers are important because Irish GDP figures are less reliable than those of peer countries (mostly because of the distorting effect of the very large multinational sector), meaning that the labour market data present the most accurate picture of the state of the economy at any given time. Second, employment levels are vital to recovery. As more people at work results in more demand in the economy, there is now a real possibility that a virtuous cycle could take hold. Finally, the boost to jobs helps the still-precarious public finances position, by boosting tax revenues and cutting expenditure on dole and other welfare benefits.
Drilling deeper into the vast array of data published yesterday shows many interesting patterns. One notable trend, as the second chart illustrates, is that most of the additional jobs are going to men. This reflects the greater availability of male workers, given that they suffered greater job losses and higher unemployment during the crash. It also reflects the sectors in which employment growth has been strongest. Those sectors, including agriculture and industry, are male dominated, with women accounting for just 12pc and 28pc of all employees respectively.
The strong increase in total employment has helped push the overall jobless rate down, with yesterday's figures revising the rate for the final months of last year to 12.1pc.
In human terms, there has been a decline of 60,000 people formally and fully unemployed over the past two years, to bring the number down to 264,000 (a good chunk of the 400,000 people on the Live Register who are in receipt of unemployment benefit do a few hours of work each week and are thus not formally classified as jobless).
While this is excellent news, focusing on the unemployment rate can sometimes be misleading. Comparing Europe with the US illustrates this well.
Many people, including some economists, say that the employment situation on the other side of the Atlantic is much better than that in the eurozone because the jobless rates are 7pc versus 12pc respectively.
While it is true that the US has recovered more strongly than the eurozone, much of the reason for the gap in unemployment rates is because many of those without jobs in the US simply leave the labour force and are no longer counted as unemployed.
A better measure is the proportion of all working age people – whether they are in the labour force or not – who are actually working. This is known as the "employment rate".
While employment rates across all age groups remain well down on the pre-crash period, and way down for younger people in particular, the good news is that they are beginning to edge up across the board.
Although these rates are not seasonally adjusted and require careful interpretation, it is the case that in every age category bar none – from callow teenagers to creaking sixtysomethings – employment rates are rising from post-crash nadirs.
There is still a long way to go, but if current momentum is maintained, we could return to full employment far sooner than almost anyone would have thought even one year ago.