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From Accountingnet.ie Recession
The latest Live Register figures for December were a bit weaker than we had been expecting. The number of unemployment benefit claimants rose by 3,300 in the month, on a seasonally adjusted (SA) basis. Thus following the 3,000 fall in numbers signing on in October (the first since March 2007), the cumulative rise of 4,200 in November and December has more than offset this drop. These developments have taken the total on the Live Register to a new high of 426,700 in December, surpassing the previous high of 425,500 in September of this year (SA). However, it is important to point out that the underlying trend continues to be one of an improvement in the Irish labour market situation. The average monthly rise in numbers on the Live Register stood at 400 in Q4. This represents a striking turnaround relative to the preceding quarters, particularly compared with the unprecedented rise of over 25,000 in Q1. In fact, the average increase in Q4 was the lowest since the first quarter of 2007, when a fall of just over 500 was recorded.
…but the underlying trend continues to be one of improvement and we now expect the unemployment rate will peak at around 13.5% Less negative trends have also been evident in unemployment rate developments in recent months. The rate hit a current cycle high of 12.5% in December, and is therefore still on an upward trajectory. However, the pace of increase has fallen back considerably. Indeed over the last six months the unemployment rate has continued to rise, but the 0.5 percentage point (pp) increase between June and December of this year represents a notable deceleration on the 3.5pp rise over the course of the previous six months. There are two factors contributing to this moderation in the pace of increase of the unemployment rate. An adjustment on the labour supply side is ongoing, linked to a combination of outward migration and lower participation rates. Less-weak labour demand is also likely to be playing some role. While employment in the economy is most-likely still falling, signs from the Manufacturing and Services PMI surveys are that it is not falling at as face a pace as earlier in the year. Our base case has been that the unemployment rate will peak between 13.5 and 14% by the middle of next year. Last month we noted that this scenario looked on the pessimistic side. Today’s figures have given us further conviction in this view and we now expect the peak unemployment rate will be closer to 13.5%.
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