Strong jobs growth shows recovery remains on track
Published 22/11/2015 | 02:30
The most important indicator on the state of the Irish economy was published last week. The quarterly national employment survey provides a massive amount of information about various aspects of the labour market.
It is made relatively more important by the fact that Irish GDP numbers are becoming increasingly unreliable as an indicator of activity (the way in which aspects of globalisation distort the GDP data is becoming more marked all the time).
Last Tuesday's jobs data for the July-September quarter brought yet more good news. Annually, the rate of employment growth in the third quarter of the year was a strong 3pc. Though that is around half the recent rates of GDP growth, it almost certainly better reflects conditions on the ground across the economy.
Recent developments show little sign of the recovery cooling. As the first chart illustrates, employment continues to rise strongly and steadily - even if there is still a long way to go before pre-crisis employment peaks are returned to.
The numbers at work in the economy in the third quarter were up by more than 11,000 in just three months (figures discussed here are adjusted for seasonal variation unless otherwise stated).
That was the fifth quarter in a row in which net employment in the economy grew by more than 10,000 (quarter on quarter) and the jobs expansion has now been going on uninterruptedly since the end of 2012.
If current trends continue the numbers at work will climb over the two million threshold over the next couple of quarters.
At this point, it is very likely that another important threshold has already been passed. Tuesday's figures show that the shrinking in the ranks of the jobless continued in the third quarter, as the proportion of the labour force that is out of work fell below 9pc.
By now - half-way through the final quarter - the number of unemployed is almost certainly below the 200,000 threshold. Another positive trend worth highlighting is the geographic spread of the jobs recovery. It is very frequently said (but infrequently said with much in the way of hard evidence) that the recovery is Dublin-centred and not being felt outside the capital and other urban conurbations. However, the breakdown of the jobs data into eight regions is one of the few good indicators we have for sub-national economic activity.
As the second chart shows (no seasonally adjusted data are available), three of the eight regions have enjoyed stronger employment growth than Dublin in the three years since the post-crash low point. The only region to have had no recovery in employment is the west.
If folk in Connacht can grumble, there was mercifully little else in the way of bad news in the huge range of labour market figures published last Tuesday. Among the most positive development has been the broad sectoral nature of the jobs expansion.
The headline figures are broken down into 13 different sectors and one miscellaneous category. Of the 14, just two did not show growth on either a quarterly or an annual basis (they were distribution, and the broad financial services sector, which includes the real estate industry).
Let's get the less good news out of the way first. The retail and wholesale sector is the single biggest sectoral employer, accounting for over 270,000 jobs. But despite the surge in retail sales over the past few years, there has been no net job creation in the industry in over half a decade.
That it has failed to claw back any of the 50,000 net jobs lost during the crash is somewhat curious, given demand conditions. Plausible explanations include consolidation in the industry - as German discounters push smaller and less efficient operators out of business - and the switch to online retailing. Much more positive has been the trend in the manufacturing sector, the economy's second biggest employer.
Despite fears about the rise of robots and other job-destroying technologies, the industry sector continued to bounce back sharply in the third quarter of the year, adding more than 4,000 net jobs in just three months.
That brought headcount back above the quarter of a million mark for the first time since 2009. Since the bottom was hit in the jobs market, more than 20,000 net job gains have been made in industry. The departure of the Web Summit gave cause to dig a little deeper into the IT jobs numbers. Unsurprisingly, given its customer base being mostly international, the tech sector was among those least affected by the collapse in domestic demand from 2008.
But for all the talk about the growth potential in that industry, it still employs relatively few, accounting for just 4pc of total employment in the economy. Nor has it been particularly fast growing when it comes to jobs. Over a full decade it has added fewer than 20,000 net new jobs.
Yet another slight surprise was the number of foreigners employed in the sector.
Although one might think when trying to get a table in a restaurant anywhere near "silicon docks" that young continentals dominate the industry, there were in fact fewer than 18,000 non-nationals employed in the sector as of the third quarter (or around one in five).
Despite the highly internationalised nature of sales-driven functions of the industry located here - which can often require mother tongue language skill levels - it is noteworthy that the share of foreign workers is not all that much higher than in the overall population.
A final related point is also worth noting. In the third quarter, the year-on-year growth rate in non-national employment accelerated strongly, to 6pc (this breakdown is not seasonally adjusted). That was well over twice the rate of growth (2.4pc) of employment growth among Irish workers.
This could suggest that foreign workers are beginning to come here in larger numbers to take up available opportunities.
During the long expansion up to 2008, too little was done to facilitate, coax and nudge Irish adults who were not working to take the copious opportunities that then existed.
The structure of the welfare/jobseeker system has improved in that regard, but it is only as the labour market tightens that the effects will become clear. It is an issue worth keeping a close eye on.
Sunday Indo Business