Tuesday 27 September 2016

Jobs recovery continues as most sectors keep hiring

Published 28/02/2016 | 02:30

Output and employment are the two most important measures of activity in an economy.

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Output in Ireland (as measured by GDP) is an increasingly unreliable measure of overall activity levels. As such, the employment measure is an even more important indicator of Irish economic activity than it is in other economies.

Last week, the latest quarterly employment numbers were published - and they give some cause for concern.

In the second half of last year, there was a slowdown in the rate of employment growth. That this comes as fears grow of an international slowdown makes it that bit more concerning.

In the 12 months up to the middle of last year, the numbers at work in the economy were rising by (a seasonally adjusted) 14,000 each quarter. During the third quarter of last year, the three-monthly increase fell below 10,000. Then in the final quarter, it fell below 5,000.

If that trend continued into 2016, job growth has now ground to a halt.

Thankfully, that is very unlikely to be the case, given a range of other indicators in the economy. Most sectoral numbers suggest that most industries are on the up: from agriculture to manufacturing and from low-skill services (such as retail) to high-skill areas (such as the IT sector).

The quarterly jobs survey breaks down employment across 14 sectors. Delving into these numbers allows trends to be explored in different labour markets. It also shows where the jobs growth in recent years has come from.

Rather than go (messily) through all the sectors, I have aggregated many of them by skills level, so that the trends can be seen more clearly. The result is illustrated in the first chart. The sectors included in the four categories in the graphic accounted for 83pc of total employment as of the final quarter of last year.

Among the most notable trend is that the government-dominated sector is the only one which did not record a contraction during the crash. As of the end of last year, there were just over half a million people working in health, education and public administration - an 8pc increase on the economy's moment of peak employment at the beginning of 2008.

While there has been a reduction in the numbers on the State's formal payroll, the reduction was limited by a ban on redundancy, which meant that downsizing had to happen gradually by natural wastage/attrition.

The cost-saving effects of the reduction in formal headcount have been partly offset by some of those leaving the public sector (via early retirement, for instance) being re-employed via agencies. Such people do not show up on the official public sector headcount, but they do show up on statisticians' count of the total numbers working in a given sector.

A third factor in the growth of aggregate employment in these sectors is increased private provision of health services. In the eight years to the end of 2015, for example, there was a 30pc increase in the number of people working in residential care homes.

After the public-sector-dominated professions, the best employment performer is the high-skilled services sectors.

While employment in the white-collar industries did suffer badly in the crash - falling by 10pc - it is now just over 2pc off the peak of early 2008. Areas such as IT, though still small in terms of total employment, have been rising steadily.

Interestingly, the only white-collar sector not to be registering growth is the 'financial, insurance and real estate activities' sector, with employment remaining sticky at around the 100,000 level.

The trend in the medium- and low-skilled services sector is broadly similar to that of the higher-skilled sector. As the chart shows, the slump was a little deeper and longer-lasting but growth since the bottom was hit in 2012 has been good.

It has been driven almost entirely by the hospitality sector. The economy's largest employer, the distribution sector (which covers wholesale, retail and transport) has been much slower to add jobs.

Finally, the industry sector, which is dominated by manufacturers, has experienced decent employment growth since the turnaround, even if total employment in the sector is still down by a very large 15pc since the beginning of 2008.

That there is really not one Irish labour market, but many, is well illustrated by the disparity in employment growth across the regions - and that is the case, despite Ireland being a tiny economy.

This is worth highlighting for a number of reasons, not least because it is so frequently said that the recovery is not being felt outside Dublin and/or the cities.

As the second chart shows, this claim is simply wrong.

Since the economy turned the corner in 2012, three regions which are not highly urbanised have recorded the highest rates of jobs growth. As the second chart illustrates, the Midlands, Border and South-East regions have all registered increases in the numbers at work of 13pc or more.

Despite all the talk about Dublin driving the recovery, which is not entirely without foundation, the capital has increased its employment by less than 10pc.

So who is under-performing? Last weekend's kerfuffle over the Taoiseach telling Castlebar folk that they whinge a lot got a silly amount of media attention. But if the people of that town are indeed grumblers, then they may have something to be unhappy about.

Their region is the only one of the State's eight regions not to have recorded growth in employment since the turnaround over three years ago. Nor, when one looks at the quarterly data over 2015, is there any sign that the West is awakening when it comes to jobs.

If that region is doing badly, its immediate neighbours have fared only marginally better in recent times.

The Mid-West and the South-West grew employment by 2pc and 2.5pc respectively in the three years to the final quarter of 2015 (although the South-West did show definite signs of a pick-up more recently).

There has been a great deal of talk about the decline of rural Ireland in recent years, and during the election campaign in particular. An important take-away from the latest employment data is that not all of rural Ireland is doing badly.

When a new government is eventually formed, that important fact should be born in the mind - particularly if the support of rural independents is being sought by parties to support a coalition.

Sunday Indo Business

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