Dark days coming to an end as economy inches back into black
Published 05/01/2013 | 05:00
THERE was a full house for breakfast at Carton House on New Year's Day after hundreds of revellers had flocked to the ancestral seat of the Dukes of Leinster to ring in 2013 in style.
The hotel is much cheaper than it used to be but it still takes a certain amount of confidence in your future to spend the last day of the year partying in a stately home after an expensive Christmas and another harsh Budget. While many of those nursing a hangover that morning probably had other things on their minds, they were yet another collective sign that the economy is beginning to mend.
The New Year is just a few days old but it has already produced a blizzard of positive economic data. Yesterday evening, the Irish stock exchange closed at its highest level since September 2008.
The government finances are better than projected, seasonally adjusted unemployment numbers fell to the lowest level in around three years and the manufacturing and services industries are continuing their long-running expansion. Retailers, often a rather doleful group, are celebrating the first rise in Christmas sales in four years.
The signs of economic recovery have been there since the summer but one had to go digging for them with the determination of a farmer out looking for truffles. Now, they are everywhere, although the macro economic climate remains worrying.
One of the problems for those calling a turn in the economy for better or for worse is that most economic statistics are backward looking. In Ireland this problem is compounded by long delays as the overworked statisticians down in Cork try to gather data about what is happening to our complicated economy. The growth figures provided by the Central Statistics Office often tell us what happened a year ago and can even be restated several years later as they were last year when we learned that the bust was not as bad as initially reported.
Even when we get the figures, they tend to be so twisted and distorted by the multinational sector that it is close to impossible to build up an accurate picture of the real economy that most of us inhabit. Our gross domestic product depends on Botox sales in California. Your quality of life depends on completely different factors and most people would often be better off using their own intuition rather than focusing on the marco economic picture.
Employment is one example. While the unemployment level was relatively stable last year, there was a lot happening beneath the service to suggest the picture was not quite as bad as it looked for those over the age of 30 and outside the construction sector. Employment agencies reported severe job shortages in some sectors where languages or computer skills are required. The data suggests that many people are losing jobs and then finding new jobs a few months later. The bad news is about half of those without a job are long-term unemployed. The good news is that this suggests many other people do find work again relatively quickly.
There are small signs of a pick up here and there although it must be said that emigration and a return to study also explains why unemployment is falling. My own favourite indicator, help wanted ads in shop windows, has made something of a comeback after a four-year hiatus.
Economists, including government boffins, are virtually unanimous in predicting that unemployment will remain above 14.5pc in 2013 or even worsen but there are common sense reasons to suspect that they are wrong. Many shops and restaurants have appeared understaffed recently and unable to cope with demand. The detailed responses to the purchasing managers indices which ask managers whether they expect to take on staff also suggest that many companies are about to bite the bullet and hire staff after years of paring things to the bone.
Like the party goers in Carton House, many employers seem to be saying for the first time in years that they have just enough confidence in the future to start hiring again. That's the good news. The bad news for many of those taking these new jobs is that they will be working side-by-side with people earning more than them. Employees will have to cut their expectations in much the same way that Carton House has had to slash prices to get things moving again.
One of the main reasons that the economy appears to be recovering is that most of us have slowly become used to the new normal. It has taken years to wean ourselves off Celtic Tiger norms but we are getting there. That new normal will mean different things for different people but for most of us it includes higher taxes, less certainty about the future and fewer material possessions.
For a significant minority, the new normal means much more suffering than this but most anecdotal evidence and an increasing amount of hard data suggest that the economy is healing again.