On the basis of Ireland’s quarterly GDP data the economy hit bottom as far back as the final few months of 2009, although no one felt that the following few years could be described as a recovery. This was partly due to the limp and volatile quarterly pattern of the GDP data and, perhaps more importantly, the continued fall in the numbers at work. Employment didn’t hit bottom until the third quarter of 2012, but the past two years has seen a clear and marked improvement in the labour market, which is probably a better barometer of the health of the economy than the headline GDP data .
Indeed, as an earlier Blog pointed out , the relationship between job growth and GDP of late has been odd. Employment ( when adjusted for seasonal affects) rose by some 58k through 2013, although GDP was broadly unchanged (growth is currently put at 0.2%). Yet we know that GDP grew strongly in 2014 ( the final figure, due in March, may show growth in excess of 5%) but employment growth was actually weaker, with a total rise of 27k over the four quarters.
That weakness was most pronounced in the first half of the year, with employment rising by over 6k, but the pace quickened in the second half of 2014 as confirmed by the q4 Quarterly National Household Survey; employment rose by around 20k in the final two quarters , bringing the total number of jobs created in the year to 27k and the overall figure during the recovery to 95k.
The sectoral pattern of job gains as revealed in the CSO data is unusual, however.The rise in employment was initially driven by agriculture ( accounting for over 40% of the rise in 2013!) and the hotel sector, but in 2014 employment fell sharply in agriculture and although virtually all other sectors saw some job gains (there were marginal falls in Public Administration and Health) some 45% of the rise in employment was again attributed to just one sector, this time Construction. Perhaps the original rise in agriculture reflected rural construction workers returning to farming and this has now partly reversed, given the upturn in house building and other construction.
The labour force also declined sharply during the recession ( a peak to through fall of 128K) before recovering by some 20k in 2013 ( a better chance of employment can encourage people back into the work force). The labour force started falling again in the first two quarters of 2014, however, and although the second half saw a modest rise it was not sufficient to prevent a 10k fall in 2014 overall. That leaves the total off the lows but it is far from clear how the labour force performs from here- will the recent fall in net emigration continue and hence help to boost the numbers seeking work in Ireland or will the fall in the participation rate continue, so keeping downward pressure on the labour force?
That uncertainty about the supply of labour will affect the unemployment total and the unemployment rate but for the moment at least the scale of employment growth is driving a sharp fall in the latter, which declined to 10.4% in the final quarter of 2014, the lowest since early 2009 and a long way below the peak of 15.1% recorded three years ago. Indeed, the q4 figure was also below the initial 10.7% ( based on monthly estimates). That means that the January estimate has been revised to 10.3%, implying that on the basis of the current trend the unemployment rate will fall below 10% in May or June.