|
From Accountingnet.ie Recession
Irish jobs data for the third quarter of 2011 were disappointing but not entirely surprising. On a seasonally adjusted basis, they show there were 20.5K fewer numbers at work, a drop of 1.1% compared to the previous quarter. This represents a significant deterioration compared to the decline of 4K (-0.2%) reported in the 2nd quarter. The sharper decline in employment in the third quarter accords with recent evidence from tax revenues and a range of survey indicators that point towards a renewed softening in activity after a better than expected performance in the first half of the year. These data are also consistent with evidence of a weaker global growth trajectory and heightened international uncertainty of late. In these circumstances, Irish based businesses would likely have postponed some planned hiring and perhaps stepped up layoffs in anticipation of a poorer near term outlook for activity. Overall, today’s data underline the weakness of economic conditions. While output has improved in some sectors these are predominantly areas such as pharmaceuticals in which the direct employment implications of substantial output increases in these areas can be relatively modest. In contrast, demand conditions in most labour intensive sectors remain weak. As a result, we continue to think numbers at work may fall somewhat more than the Department of Finance envisages in 2012. Our preliminary estimate is a further decline of 15 – 20K. However, this number is likely to be inflated by redundancies in the public sector and in financial services where the age profile and financial position of those becoming redundant may be somewhat stronger than has been the case with many other job losses through the downturn. In turn, this may restrain the adverse impact on consumer spending from these layoffs. On balance, we expect the unemployment rate will remain around 14% in 2012. The 3rd Quarter jobs data emphasise the scale of the decline in employment in the Irish economy. Numbers at work have now declined for 15 successive quarters since an end 2007 peak leading to a cumulative reduction of 347K in numbers at work, a drop of 16%. Some context for the scale of this decline is provided by a comparison with the Eurozone where employment fell for just six quarters to give a peak to trough decline of 2.6% or the US where numbers at work fell for about eight quarters giving a total decline in employment of around 6%. Unusually, the Q3 jobs data don’t suggest the recent decline in employment was driven by construction. Indeed, seasonally adjusted data show a marginal rise in employment in the building sector, the first since the second quarter of 2007. Instead, the largest quarterly decline was in Agriculture (-5K,-5.8%). An outturn that may reflect changing seasonal practices within that industry rather than any marked change in business conditions of late. There were also large declines in employment in a couple of business services areas in the third quarter. The declines of 4.6K or 4.5% in ‘financial, insurance and real estate activities’ and 3.5K or 3.5% in ‘professional, scientific and technical activities’ were both surprisingly large and reverse a reasonably healthy trend in these sectors in the past couple of quarters. This might reflect changing seasonal employment patterns in these areas or some element of sampling error. The fact that there was an increase in employment in retailing and in accommodation and food services might suggest the latter explanation rather than the former. That said, today’s data overall were entirely consistent with the picture of an economy that is struggling to establish an ‘escape velocity’ sufficient to produce any improvement in the labour market. One sign of changing employment patterns of late in these data is a pick-up in the rate of decline in female employment relative to male employment. When the downturn began the severe retrenchment in the construction sector meant male employment fell notably faster than female employment. In the Q3 data the percentage drop in female employment at 1.3% (-11K) was larger than the drop in male employment (-0.9%, -9K) the first time this has happened in the downturn. The weaker jobs picture of late meant that unemployment continued to edge higher from 14.2% to 14.4% over the quarter, an outturn broadly consistent with the message coming from the monthly live register data. Significantly, weaker labour market conditions have translated into a marked increase in longer term unemployment. In the third quarter of 2008, Ireland’s long term unemployment rate stood at just 1.7% and numbers out of work for more than twelve months accounted for 24% of those unemployed. In the third quarter of 2011, the long term unemployment rate reached 8.4% meaning some 56% of those out of work have been jobless for more than a year. The drop in employment has also been heavily concentrated in the under 35’s. Between the third quarters of 2010 and 2011, numbers at work in Ireland fell by 2.5%. Over the same period the number of under 35’s in jobs declined by 7.6% whereas the number of over 35’s in work actually increased, albeit marginally, by 0.8%. This reinforces the strongly divergent trend evident since the downturn began. While overall employment fell by 16% since late 2007, this has been almost entirely due to a 31.6% fall in employment among under 35’s. Over this period numbers at work aged over 35 fell by just 3%. Clearly, the very skewed age profile of jobs losses reinforces the weakness in activity in consumer spending and housing within the Irish economy as the under 35’s are the key spending age group. These trends also dovetail with the pick-up in outward migration. However, today’s data also suggest there has been a modest increase in the number of Irish nationals aged 15 and over in the country in the past year (+18K, +0.6%) together with a further significant decline in non Irish nationals aged 15 and over (-2K, -5.8%). So, these data continue to point to some continuing outward migration by Irish nationals but they don’t support the view that there has been a dramatic surge in those outflows through 2011.
Austin Hughes, Chief Economist, KBC Bank Ireland, Sandwith Street, Dublin 2. 01 - 664 6889 This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice. © Copyright 2005 by Accountingnet.ie |
