Saturday 19 January 2019

Central Bank predicts first jobs growth since 2007

Governor of the Central Bank Patrick Honohan addressing the fourth annual Corporate Restructuring Summit in the Convention Centre yesterday
Governor of the Central Bank Patrick Honohan addressing the fourth annual Corporate Restructuring Summit in the Convention Centre yesterday
Brendan Keenan

Brendan Keenan

THIS year should see the first increase in employment since 2007, the Central Bank has said in its latest bulletin.

This is despite continued falls in government employment and a further reduction in the construction industry.

In its quarterly report, the bank said the "exceptional upheaval" in the labour market may be coming to an end.

Analysis in the report showed that, while 87,000 people emigrated in the 12 months to April, immigration continues at a high levels.

Almost 50,000 people arrived in the country in the same period, of whom almost half were Irish nationals.

"This has kept the figure for net emigration below levels recorded during the late 1980s," the report said.

The figures come on the back of revised estimates which showed growth last year slightly better than the bank expected, but poorer growth in 2013.

Output (GDP), at 1.3pc, will still be almost twice the estimate for last year, but is revised down from an earlier 1.7pc forecast. It will be 2014 before significant growth returns to the economy. "The domestic economy continues on its slow path to stabilisation," Central Bank economist John Flynn said. "Last year saw the first increase in domestic demand for three-and-a-half years."


The bank warned that these better forecasts could be hit by poor conditions abroad, especially in Europe. The eurozone economy contracted for four consecutive quarters up to last October, and the British economy shrank in three. The bank is expecting a further contraction in eurozone output for 2013.

"Exports account for 100pc of Irish GDP so the external environment has a major impact," said chief economist Lars Frisell. "It is significant that the Irish labour market is turning and there is the potential for an increase in domestic consumption in 2014."

He said that labour costs were still high, especially in the public sector, compared with competitor countries. Data showed hourly earnings in manufacturing on an upward trend for the first time since the crash, with earnings up 2pc last year.

"We have to address those higher costs now that the economy is picking up," Mr Frisell said.

Last year also saw the first recovery in investment, although construction continued to drag the figures down. Excluding that, and the purchase of aircraft by leasing firms, other investment was up 7.3pc – a figure the bank calls "promising".

Building is not expected to pick up until 2014 but the bank thinks investment in plant and machinery will grow this year.

The report said the government deficit last year may end up at less than 8pc of GDP, compared with an original target of 8.6pc.

Mr Frisell said the Government should not use this gain to ease back on the budget correction programme. It would be better to move to the 3pc deficit faster than planned, which would reduce uncertainty.

Irish Independent

Also in Business