The Quarterly National Household survey provides a comprehensive update on the Irish labour market. Whilst the survey is not the most timely measure on the labour market, its does provide the official figures for employment and unemployment levels, along with a detailed sectoral analysis. Today’s QNHS, which covers the second quarter, confirmed that the Irish labour market remains in a fragile condition, as indicated by the continued fall in employment.

In terms of employment, the latest survey shows that employment continued to decline in Q2, albeit at a slower pace. On a seasonally adjusted basis, employment fell by 3,200 in the second quarter, representing a 0.2% q/q decline. The Q2 figures indicate some degree of improvement compared to the previous quarter, where employment fell by 0.4% q/q. Indeed, Q2 marks the third consecutive quarter that the quarterly declines in employment have eased. On a yearly basis, the data is displaying a similar trend, with a 2.1% y/y decline in Q2 versus a 2.8% y/y decline in the first quarter.

…as job cuts continue the trend seen in Q1 of less broad-based declines…

From a sectoral perspective, the QNHS provides a detailed breakdown of employment across 14 sub categories. The latest breakdown shows a continuation of the trend from the first quarter, where the declines have become less broad-based. In the second quarter, 8 of the 14 categories managed to make modest quarterly gains, compared to 7 in Q1, and this compares favourably to the broad-based declines across the majority of sectors in the last quarter of 2010. Categories that recorded employment gains in Q2 on a quarterly basis included Accommodation and food service activities (+4,600 – its first quarterly gain since Q12010), information and communication (+2,600), admin and support services (+2,700), financial services (+2,300) and wholesale and retail trade (+2,100).

However, these increases were not sufficient to offset falls in other categories. Notably, there was a sharp fall in the public administration and defence category, where employment fell by 7,300 in the second quarter. This fall could be due in some part to internal transfers within the public sector, as evidenced by the 5,200 increase in the health and social work activities category.  The construction sector extended its streak of declines to 16 quarters, with a fall of 2,600. On a yearly basis, the construction sector recorded the biggest sectoral decline, with a fall of over 19k. The latest Ulster Bank Construction PMI for August suggests that employment in construction is continuing to decline, but that there has been a deceleration in the rate of decline in recent months. We await the Q3 QNHS to see if this trend is borne out in the official data.

…while the official unemployment rate increased to 14.2%

The official unemployment rate came increased from 13.9% in Q1 to 14.2% in the second quarter. The seasonally adjusted number of unemployed rose by 6,100 between Q2 and Q1. As is customary, the release of the QNHS triggers any necessary back revisions to the monthly Live Register estimates, which now show the August number being revised up from 14.4% to 14.5%. An increasing area of concern for the Irish labour market is the long term unemployed category. This category is defined as those who have been out of work for over a year. Data from the QNHS, showed that in the second quarter of this year, the long term rate stood at 7.7% (vs. 5.9% in Q2 2010). The long term rate is important both from an economic and societal perspective. People who are out of work for more than a year have to use up more savings to finance day to day expenditure and this depletes their future consumption. Their skill set depreciates and there is also the psychological impact of being out of work for an extended period of time. 

In terms of the outlook, the latest update on the labour market does offer some encouragement with the continued slowdown in the rate of falls in employment. The recent trends in the QNHS suggest that the unemployment rate peaked in the fourth quarter of 2010 at 14.8%. However, given the export based dynamic of the economic recovery and the fact that the export sector tends not to be particularly labour intensive, the nature of the recovery rules out any significant gains in employment in the early stages of the recovery cycle.

 
 
 
John Fahey                                                      
Economist, Republic of Ireland
Ulster Bank Capital Markets
3rd Floor
Ulster Bank Group Centre
George's Quay
Dublin 2 
Tel: +353 1 6431565

Fax:  +353 1 6431672
Email:  john.fahey@ulsterbankcm.com
Website:    www.ulsterbankcapitalmakrets.com