Annual decline in total employment eases to its slowest pace in four years.
Quarterly National Household Survey (QNHS) results for Q3 out today show total employment levels in the Irish economy fell by 5,800 (0.3%) vs. the second quarter, in seasonally adjusted terms. This represented a slower pace of decline than recorded in the first and second quarters of the year, during which employment fell by 0.5% and 0.4% q/q respectively.
The quarterly series tend to be volatile so analysing the annual changes can be another useful way of looking at the underlying trends. Such analysis reveals several important features of the performance of the Irish labour market at present. First, while total employment is still falling in annual terms, the pace of decline is continuing to ease. In fact, the annual rate of decline eased to -0.2% in q3 – the slowest pace of decline since jobs growth turned negative four years ago. But perhaps even more significantly, today’s numbers highlight that private sector firms have become the source of positive job growth.
Based on available CSO data, we estimate that private sector firms added over 19,000 jobs in the year to the third quarter, an increase of some 1.7%. In fact, based on today’s release which also incorporates revisions to the historical data (partly to incorporate the results of the 2011 Census), employment in private sector firms has been expanding on an annual basis since the final quarter of 2011. In total, we estimate that private enterprises have boosted their employment levels by over 40,000 (3.7%) since the low point of the current cycle which was Q1 2011.
Interestingly, our estimates put growth in the number of employees in private sector firms over the past year ahead of the 16,000 decline in the number of public sector workers, resulting in a net increase in the number of employees across the economy of some 3,000 (0.2%) over the past year – the best performance since Q1 2008. But in any case, this isn’t quite the full picture of what’s going on in the private sector, as self-employment is continuing to fall which means that overall employment has continued to decline, albeit at the marginal pace of 0.2% noted above.
At a sectoral level, looking at the trends over the past year reveals that it is the Services and Agri sectors which have been contributing positively to jobs growth. Total employment in services is up 8,700 over the past year while direct employment in Agriculture, Forestry and Fishing is up over 3,000. There isn’t one particular area of the services sector which is showing major strength. Rather the overall increase reflects small rises across a number of diverse areas ranging from (private) education to food and accommodation to IT to professional services. Against that, several sectors continue to show clear signs of ongoing weakness. Notably, construction employment fell by a further 7,400 over the past year while the losses in industry were even larger at 7,900, the latter performance being at odds with the signals from the monthly manufacturing PMI survey which has been pointing to expanding employment levels.
…the unemployment rate stands at 14.8% having edged lower for the second consecutive quarter aided by ongoing falls in the labour force
As mentioned above, today’s release of the QNHS was the first to fully incorporate the new population benchmark provided by the 2011 Census, while there were also revisions due to some relatively minor methodological changes. With the Census having recorded a working age population in Q2 2011of 96,400 greater than the prevailing estimates, the CSO today issued revised totals for employment and unemployment to account for the larger estimated population. Net net, the revisions have resulted in slightly higher estimates of the overall unemployment rate in recent years as the higher than expected population growth was found in age-groups (notably the 20-24 group) in which average unemployment rates were higher than for the population as a whole. Thus, unemployment is now estimated at 13.9% and 14.6% for 2010 and 2011, some 0.3 and 0.2 percentage points higher than previously estimated respectively.
As for the most recent trends in the unemployment rate, the revised seasonally adjusted figures now put the cycle peak at 15% in Q1 of this year. But since then, the jobless rate has edged lower, falling by 0.1% points in each of the second and third quarters to stand at 14.8% on the latest estimates. As noted above, overall employment is continuing to fall so the decline in the jobless rate is due to the ongoing declines in the labour force rather than any outright improvement in employment. In turn, the major reason for the fall in the workforce is the decline in the working population aged 20-34 – likely due to the ongoing influence of net outward migration.
Overall, these latest figures clearly highlight that the Irish labour market remains very weak, with the jobless rate continuing to hover close to 15%. Nevertheless, some of the emerging trends do offer important encouragement that overall Irish labour market conditions are closer to stabilising than they have been at any point in the past four years. Overall annual employment growth is virtually at zero having come from a position where it was declining at an annual pace of 8.6% at the height of the crisis. Furthermore, private sector firms added more jobs than the public sector shed over the past year. While this is merely a point-in-time snapshot of what’s going on in the Irish jobs market, it does serve to highlight the importance of a vibrant, expanding private sector in acting as a counterweight to the ongoing effects of the fiscal tightening. It also provides important fundamental support for the more positive trends seen in other sectors including property prices and retail sales lately.
However, our encouragement is tempered by the knowledge that international economic conditions remain weak and very challenging. This means it may take some time yet for the overall pace of economic growth in Ireland to reach levels consistent with ongoing sustained increases in total employment.
Simon Barry, Chief Economist Republic of Ireland, Ulster Bank.