• 4th quarter jobs data show further decline but smallest in a year and a half.
  
• Construction, manufacturing and consumer related areas bear brunt of downturn.
  
• Irish job losses heavily front loaded in early 2009 but still significant as year ended.
  
• Further job losses likely in early 2010 but conditions could stabilise later this year.
  
• Notably sharper job losses among non-nationals lead to a reversal of earlier migration flows.
  
• Flexible jobs market also sees big drop in participation rates.

Employment data for the final quarter of 2009 confirm the weakness of the Irish jobs market.  They also hint that the pace of job loss may be easing.  The quarterly decline in numbers at work was the smallest in a year and a half.  The likelihood is that employment will continue to shrink through the first half of 2010 but today’s numbers suggest some possibility that job market conditions could stabilise in the second half of this year.

Even allowing for a sharper decline in economic activity than elsewhere, the drop in employment in Ireland in the past two years has been markedly greater than in other countries.  Numbers at work in the Irish economy have fallen by 11.9% whereas the comparable figures for the Eurozone and US are 2.6% and 6.1% respectively.  It remains probable that the cumulative drop in employment during the downturn will be close to 300K.  Today’s data show there was a fall of some 254K between late 2007 and the end of 2009.  The likelihood is that the bulk of the remaining 50K decline will occur by the middle of 2010. 

The drop in Irish employment has been concentrated in three main areas; construction, manufacturing and wholesale/retail.  Since employment in construction peaked in the summer of 2007 some 142K jobs or more than half the total at work in the building industry have been lost.  In turn, construction has accounted for just over half of the drop in employment across the Irish economy as a whole.  Jobs in industry have been declining through most of the past decade but some 57K jobs have been shed since early 2007 representing a little under 20% of its workforce.  Jobs in the wholesale and retail trade have been hit hard by a sharp pullback in consumer spending.  As a result, 48K jobs or some 15% of that sector’s workforce have been lost.  Together, these three areas account for all but 7K of the 254K jobs lost in the Irish economy in the downturn.  That is not to say that there have not been significant job cuts in other areas.  However, it appears that there was also some measure of job creation that meant net job losses in other areas were comparatively modest.  Indeed, today’s data show that numbers at work in five sectors, transportation, and storage, accommodation and food services, information and communication and health and related activities were higher at the end of 2009 than at the end of 2008.  Similarly only 6 out of 14 sectors recorded significant seasonally adjusted declines in employment between the third and fourth quarters of 2009.

Seasonally adjusted data show some easing in the pace of job loss even in hard hit sectors such as construction, industry and wholesale/retail in the second half of 2009.  This might suggest that in contrast to other countries where efforts were made to preserve employment, job cuts in Ireland seem to have been front loaded.  Presumably, the scale of deterioration in Irish economic conditions meant companies felt there was little to be gained by ‘hoarding’ labour.  Diagram 1, above, shows quarterly changes in employment and unemployment from today’s household survey data as well as quarterly changes in the live register. 

This diagram suggests that through the middle years of the past decade, jobs growth approaching 25K or greater was sufficient to keep unemployment flat in spite of sharp increases in new entrants to Ireland’s labour force.  In 2008, however, job cutting intensified and led to an acceleration in numbers unemployed.  This peaked in the first quarter of 2009 and has begun to moderate more recently.  The diagram also suggests that the recent easing in unemployment increases has been more pronounced than the easing in the pace of job losses.  This reflects a decline in the labour force reflecting significant changes in participation in education and in migration.

Dramatic changes in Irish economic conditions have prompted even more dramatic changes in participation in the labour force.  In 1998, the participation rate was 57%.  By end 2007 this had climbed to 64.1%.  This largely reflected a 10 percentage point jump in female participation which in turn owed something to individualisation as well as the increased demand for labour.  Male participation jumped to 73% from 70% a trend that has since reversed with a particularly sharp recent drop in labour force participation among 15-24 year olds which may reflect in part increased uptake of educational places.  As the deterioration in employment has been particularly severe in male dominated areas such as construction and industry the recent drop in female participation has been altogether more modest.  So, the overall participation rate has fallen to 61.2.

A possibly more notable aspect of the seachange in Irish labour market conditions is a sharp turnaround in migration flows.  The Irish jobs market has become very tough for all but particularly difficult for non-Irish nationals of late.  While overall numbers at work fell by 8.1% between the final quarters of 2008 and 2009, the decline for Irish nationals was 6.7% while for non-Irish nationals it was 16.4%.  In part, this reflects a concentration of non-Irish national employees in hard-hit areas such as construction but even in those areas the drop in non-national employment has been markedly greater than that of Irish nationals.  This gap presumably reflects shorter or more flexible employment contracts as well as a tendency towards ‘last in first out’ in job shedding decisions.  So, today’s data confirm that migration offers a key balancing mechanism for the Irish jobs market.  Perhaps surprisingly, today’s data provide little support for widespread anecdotal reports of a dramatic increase in emigration among Irish nationals.  Between the final quarters of 2008 and 2009, the estimated number of people of 15 and over living in Ireland fell by 13K or 0.4%.  This comprised a 42K or 8.9% drop in non-Irish nationals and a 29K or 0.9% increase in Irish nationals.

Today’s data also reveal a slightly higher seasonally adjusted unemployment rate in the final quarter of 2009.  The increase from 12.5% in the Autumn to 13.1% in the last three months looks unusually large and may reflect reduced availability of part time work.  It seems likely the unemployment rate will stabilise through the first half of 2010 has been suggested by trends in the live register.  It now seems likely that the unemployment rate will peak somewhat below 14% and average around 13.5% in 2010 before declining to around 12-12.5% in 2011.  Unfortunately, any improvement in the economy is likely to be modest and areas such as construction and consumer spending may not see much upturn for some significant time while public sector and financial services employment are set to shrink.  This means that Irish job market conditions may improve only marginally in late 2010 and early 2011.

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The above information is believed to be reliable, but is subject to change without prior notice.