Thursday 20 July 2017

It's not 'hype', the worst really is over

The armageddon brigade may argue otherwise, but the evidence suggests we are on the slow road to recovery, writes Marc Coleman

This year is going to be a crucial year for recovery. The worst of the recession's first-round effects have passed, but with growth still feeble and the knock-on effects still working their way through the economy's gullet, it won't feel like that for another 18 months or so. Still, the signs of recovery are everywhere.

However, not everyone agrees. One recent article has alleged that radio coverage of economic news -- it didn't say which station -- was nothing more than "recovery hype" and was like "listening to Pravda".

As well as being the Russian word for "truth", Pravda was also the name of the main media organ of the Soviet Communist party. But -- to be precise -- in its 80-year history it was always a newspaper and never a radio station and, therefore, listening to it was physically impossible.

The main Russky radio station in those days was, of course, Radio Moscow -- a station I remember well as someone now broadcasting my own radio show for the simple reason that I did my first ever radio broadcast on it on a student exchange trip to Moscow in 1988.

By 1988 and under Mikhail Gorbachev (remember him?) the station had put its days of relentlessly reporting heroic statistics behind it. Sure, it was biased. But it had an intelligence and sophistication about it that would put much of today's sensationalist coverage of the economy -- both negative and positive -- to shame.

And if our own Government is trying to engage some sort of Orwellian propaganda, it's making a pig's ear of it.

In an announcement to the Dail last Thursday the Taoiseach actually managed to make the January Live Register figures look far worse than they were by telling us how the dole rose by 13,300 when in fact the seasonally adjusted rise -- the correct figure -- was 5,800.

Still a bad number, you say. To be sure. We will have to wait for the March figure to make a proper comparison with the true measure of unemployment -- the Quarterly National Household Survey.

Until then the January rise needs to be put in a cyclical as well as seasonal perspective. In a downturn many companies close down at the end of the year and that makes January a particularly nasty month for layoffs. January 2009 saw the dole rise by 29,000 -- by far the biggest rise last year. So although the latest January jump of 5,800 ain't no kind of fun, it is a strong sign that the worst is behind us as far as the rate of job loss is concerned. Of course if those talking down the economy have their way, things could get worse and one has to worry about whether their agenda is to create a self-fulfilling prophecy that will prove them right.

As for those who claim there are now 430,000 unemployed, the true unemployment total is 289,000. That number is bad enough, thank you very much, and doesn't need further exaggeration. We also need to remind ourselves constantly that the numbers still at work in our economy, 1.9 million, is broadly equal to the number of Irish nationals who want work, 1.93 million. That we are the only EU country to absorb a number of migrants equal to one-10th of its population in the past decade is a noble and generous thing.

And no one should blame immigrants for our unemployment levels. But neither can any rational discussion on that unemployment level occur without addressing immigration.

There is also positive news on unemployment. Until a fortnight ago, the central bank believed unemployment would rise to 14 per cent. Consistent with the recovery, it has now revised this down to 13.5 per cent (the latest rate is 12.7 per cent). Again, its a very bad number but its still a better number than before.

Then we come to the exchequer returns for January released last Tuesday. Again, we need to compare January 2010 with January 2009 and the 17.7 per cent fall that results is no cause for joy. But in December the year-on-year fall was nearly 20 per cent.

Tax revenues always lag the economy by a few months. So the January tax take tells us more about the state of the economy in late 2009. And as a lagging not a leading indicator, the fact that the annual rate of fall in taxes is easing is consistent with the slowing rate of decline. If Government reforms the tax base as the Commission on Taxation recommends, the recovery expected before end of year should see taxes growing by this time next year.

But what about lending? Fears have been stoked about the prospect of a sudden withdrawal of the ECB's emergency liquidity measures. But last week ECB board member Lorenzo Bini Smaghi said that while the ECB's withdrawal of emergency liquidity wouldn't be easy, the ECB would be careful to avoid an adjustment that was "too swift" and which might give rise "to recessionary effects".

As for Nama's reliance on ECB funding, it is -- as anyone who has checked their facts knows -- mostly in the form of normal instruments that will still be around when those exceptional measures are withdrawn.

The real problem with lending is, in fact, not coming from the ECB side, but is because bankers are cutting back lending too much and to the wrong customers.

One reason for this is a lack of internal reform in bank management practice. But another is that the armageddon brigade are scaring us all stiff. And that's because it is so much easier to be sensationalist than it is to do the hard graft of telling the truth about our economy. In fact, the Russians have a saying for the problem: "V pravda net izvestiy, v Izvestyakh net pravda", meaning "there is no truth in the news and no news in the truth".

Marc Coleman is Economics Editor of Newstalk 106 to 108FM and presents 'Coleman at Large' every Wednesday from 10pm

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