Oliver Mangan, Chief Economist at AIB discusses job growth in Ireland has some way to go before its rates drops to US and UK levels.
Employment stats are good but there's a long way to go for Ireland to be working again
While now comfortably below the average eurozone jobless rate of 11.1%, Ireland still has some way to go before its rate drops to US and UK levels of 5.3% and 5.6%, respectively, writes Oliver Mangan Chief Economist at AIB.
There seems no end to the good news on the Irish economy. Following on from recent figures, showing very strong GDP growth and rapidly improving public finances, come very impressive labour market statistics.
Data published by the CSO, last week, for the second quarter of 2015 show very strong job growth, with a continuing marked decline in unemployment. Employment rose by 19,000 or 1% in the second quarter, following increases of 15,000, or 0.8%, in quarter one and 12,000 (+0.6%) in the final quarter of last year.
On a year-on-year basis, employment was up by over 57,000, or 3%. Furthermore, all of the job growth was in full-time employment. Another positive sign is that the job gains were broad-based, with employment rising in 11 of the 14 sectors in the CSO survey. Construction saw the biggest gain, with jobs growth of almost 20,000, or 18.5%, in the year.
Meanwhile, the finance, insurance and real estate sector saw employment rise by 5,500 or 5.7%. Employment in industry rose by 10,000 or over 4%. This, no doubt, reflects the strong flow of new FDI in recent years, but also a strong performance by indigenous industry, as shown by a big rise in output from this sector over the past year.
“Encouragingly, the job growth in the past year was quite evenly spread across the country”
Overall, total employment now stands at over 1.96m, its highest level since mid-2009. It has now risen for 11 consecutive quarters from its low point of 1.83m reached in mid-2012. The steady rise in employment, combined with ongoing emigration, have resulted in a sharp fall in unemployment.
The unemployment rate dropped to 9.6% in the second quarter of 2015, down from 11.6% a year earlier and a peak unemployment rate of 15.1% reached in early 2012. The CSO data show the number of unemployed stood at 207,000 in quarter two, down from 249,000 a year earlier and a peak level of 327,000 reached at the start of 2012.
Thus, unemployment fell by 42,000 in the past year and is now 120,000 below its peak.
Based on recent trends, the unemployment rate should fall to 9% or below, by the end of this year. However, while now comfortably below the average eurozone jobless rate of 11.1%, Ireland still has some way to go before its rate drops to US and UK levels of 5.3% and 5.6%, respectively.
Last week’s CSO data also show that the labour force is beginning to grow again as it expanded by 14,000 or 0.6% in the past year. This reflects a pick-up in labour force participation rates and an easing of net outward migration. New CSO population estimates for 2015, released last week, also confirm there has been a decline in net outward migration. It fell to 11,600 in the past year from 21,400 in 2014 and 33,100 in 2013.
The fall last year was largely due to increased immigration as more people moved to Ireland, rather than a decline in emigration. Interestingly, unemployment does not appear to be a key driver of emigration at present. Half of those (aged 15 years and over) who emigrated had jobs, while another 30% were students. Less than 15% were unemployed.
Furthermore, while around half of emigrants had third-level qualifications, so too had nearly half of those immigrating to Ireland. It points to very fluid labour markets, with people prepared to move abroad in search of better job opportunities.
With the Irish economy expected to continue growing strongly, we should see a return to net inward migration before too long. Meanwhile, other data released last week showed private sector wage growth has picked up to over 2%. This is another positive development for migration flows.