Q2 Quarterly National Household Survey
Today’s Quarterly National Household Survey (QHNS) for the second quarter of this year provides an important update on the state of the Irish labour market.
Annual decline in employment plumbs new record depths…
The level of employment peaked in Ireland in the first quarter of 2008 at 2.14 million, according to the CSO’s seasonally adjusted (SA) estimates. Since then, there has been a deep downturn in the economy which has translated into a substantial weakening of the jobs market. Today’s QNHS data for the second quarter indicate that the economy shed 174,300 jobs in the year to April-June. In percentage terms, this corresponds to an 8.2% decline – the sharpest annual drop since quarterly data began in the late 1990s. This 8.2% drop was in line with our forecast, and leaves our estimate for an 8.3% fall for the year as a whole broadly on track. While the Q2 outturn may not have been any weaker than we were factoring in, this still leaves the labour market in line to experience the sharpest annual % fall in employment since modern records began (going back to at least the 1960s).
In total, the economy has now experienced a total fall in employment of almost 195,000, or 9%, from the peak level (again, on the SA numbers). To put this in an international context, employment in the US fell by 4.3% from its peak (in Q1 ’08) to the second quarter of this year and that in the UK fell by about 2% on the same basis. So, mirroring the comparative weakness in the broader economy, the Irish labour market is experiencing a much more severe adjustment in employment than is the case among our main trading partners.
…albeit that the quarterly fall of 36,000 recorded in Q2 was less shocking than the 69,000 plunge recorded in Q1
There is certainly little to cheer about in today’s numbers. But it is worth highlighting that the pace of job losses across the economy has moderated somewhat. The SA data show that employment fell by a staggering 69,200 in the first quarter compared with the previous three months. These latest figures suggest that while the rate of employment decline is still considerable, at 36,300 it does represent an easing in the pace of decline. In this respect, it is sending a signal consistent with other indicators of the jobs market which have begun to show less negative trends in recent months, including the Live Register.
Construction weakness continues to dominate, as job losses here contribute almost half of the total decline in employment over the past year. Resilience in areas of the public sector looks unsustainable…
Looking at the sectoral breakdown, construction-sector weakness remains a major source of job-shedding, accounting for 96,000 or almost 50% of the total fall in employment from the Q1 ’08 peak (see table below). The number of people employed in the sector has now fallen by a cumulative 114,700 from the record high of over 270,000 reached in the second quarter of 2007. Other areas being particularly badly hit include Wholesale and Retail Trade which has seen a fall of 34,400 (11%) from peak while employment in Industry also continues to contract sharply, down 27,300 since Q1 ’08 and down 44,900 (15%) from its cycle high of 304,800 reached in Q1 ’07.
Interestingly, while the latest numbers confirm a significant ongoing reduction across most areas of the private sector, several categories dominated by the public sector continue to show rising employment. Such categories include Public Administration and Defence, Education and Health, all of which have shown modest increases over the past year, totalling about 16,000. While this pattern has prevented an even larger correction in total employment, we don’t regard it as sustainable given the attempts underway to reduce the numbers working in the public sector. Recall the McCarthy Group recommended a reduction of 17,300 in public sector numbers.
Official jobless rate more than doubles to 11.6% in Q2 from 5.5% a year ago, in line with Live Register estimates
Consistent with an extremely weak economic and labour market situation, unemployment continued to rise at a rapid pace in the second quarter of the year. The number unemployed stood at 259,500 on a SA basis in Q2, an increase of 135,500, or 110%, from the second quarter of 2008. In terms of the quarterly trend, the number unemployed increased by 35,200 from Q1, compared with a rise of 44,600 a quarter earlier. While still showing a sharp increase, the relatively smaller rise in the number unemployed in the second quarter is consistent with the less negative trend observed Live Register data over the same period. Also in line with what the Live Register indicated was the dramatic rise in the unemployment rate to 11.6% in Q2, up from 10.1% the previous quarter, and over double the 5.5% rate recorded a year earlier. We know from the latest Live Register data that the unemployment rate rose to an estimated 12.4% by August. This is an indication that a further notable rise in the unemployment rate is likely to be picked up by the next set of QNHS data for the third quarter.
Somewhat curiously, the QHNS data showed a 2,500 rise in the labour force in the second quarter, to leave the total at just over 2.2 million (SA). This compares with a fall of 24,000 in the first quarter of the year, a development which the CSO attributes to seasonal factors associated with more individuals entering the labour force during the summer months. However, given that both the non-seasonally and seasonally adjusted data both showed a rise in the labour force over the period, we doubt the sustainability of further increases in the labour force in coming quarters. At this stage we retain our view that the peak in the unemployment rate is likely to be of the order of in excess of 15%, though trends in the labour force in the period ahead will have an important bearing on the extent of the total rise.
Separately, today also saw the release of the latest population and migration estimates for the year to April ’09. The overall population is estimated to have shown an annual increase of 37,300, or 0.8%. This takes the estimated population in the State to 4.459 million. The overall increase masks some significant differences in the components of that change. Notably, and perhaps not surprisingly given the state of the labour market, Ireland is now again experiencing net outward migration. This is estimated at 7,800 in the year to April – the first year of net emigration since 1995. Even more striking is the make-up of that net figure, which includes a huge 65,100 movement of emigrants – the largest gross outflow from the State in 20 years. But just as striking is the fact that the country is experiencing a major baby boom. There were 74,500 new births in the year to April – the largest annual increase since 1896, a development which is acting to offset the influence of the newly emerging trend of outward migration in terms of its effect on the population as a whole.
Overall picture still extremely weak, but not any worse than expected
The overall picture which emerges from the latest QNHS is one of a jobs market which continues to be characterised by profound weakness. Looking at the changes which have taken place over the past year, the number of people in employment is falling at a record pace while the numbers out of work continue to rise at a dramatic rate. While these latest numbers show that the pace of employment decline did ease back somewhat in the second quarter, probably the best thing that can be said about today’s numbers is that they are no worse than we had expected.
Simon Barry
Chief Economist Republic of Ireland, Ulster Bank
Tel: 00 353 1 643 1553
Tel: 00 353 1 643 1565
Group Economics
Ulster Bank Capital Markets| 3rd Floor | Ulster Bank Group Centre | George's Quay | Dublin 2 | Ireland
Contact: jennifer.kelly@ulsterbankcm.com | +353 1 643 1688
This document is intended for clients of Ulster Bank Ireland Limited who are market professionals or business investors and is not intended for use by any other persons. Opinions constitute our judgement at time of issue and are subject to change. This document is not intended as an offer or solicitation to buy or sell securities in which Ulster Bank may trade and/or have a position. Pricing quoted is indicative only and subject to change in line with market movements
