Irish Unemployment: 131,000 or over 1 million?

Unemployment in Ireland is officially measured in the quarterly Labour Force Survey(LFS), based on a sample of households, and the numbers in that category have to be both available for work and to be actively seeking it. The Survey also captures total employment, with the sum of those in work and unemployed defined as the labour force.

Prior to the Covid Pandemic and Economic Lockdown the unemployment figure had fallen to a 115,000-120,000 range, with the unemployment rate hitting a cycle low of 4.7% in late 2019. The first quarter of 2020 saw a modest tick up, to 123,000 , and an unemployment rate of 5%, with the universal belief that the following months would see a massive spike , a view reflected in most economic forecasts, which envisaged average unemployment rates of 15%-20% over the year.

The CSO issues a monthly estimate of unemployment, which is often revised based on the LFS when published, and it was a surprise to many that the increase in April and May was very modest ( a rise to 138,000) followed by a fall in June, to 131,000, with the unemployment rate easing back to 5.3% from 5.6%. On the face of it then, these figures are wildly at odds with consensus forecasts.

The CSO does provide an alternative measure, which takes account of those in receipt of the Pandemic Unemployment Payment, and that figure rose to a peak of around 600,000 in early May. However, those recipients do not meet the definition of unemployed as per the LFS so are not captured in the official figure. One option is to assume all are in fact unemployed ( which is unlikely to be the case)and so adding them to the official figure. The CSO use that approach to give an ‘upper bound’ for unemployment , resulting in a total of 695,000 in April and an unemployment rate of 28%.

The numbers in receipt of the PUP have fallen steadily over the past two months, as Lockdown eased, so the upper bound unemployment total in June had fallen to 560,000, with an unemployment rate of 22.5%. Two competing forces will impact that figure from here- the PUP figure will continue to fall as the economy re-opens but some firms wil either not emerge from Lockdown or do so with a reduced workforce, so boosting the official unemployment total.

The Live Register adds an additonal twist . This measures those claiming unemployment Benefit and Assistance and although not the official measure of unemployment ( the cycle low there was 182,000) the trend is used by the CSO to estimate the monthly unemployment figure . Again the Register picked up sharply in April and May ( to 226,000) but fell back again in June, to 221,000. When the PUP figure is added that total rises to 660,000, None of these figures take acount of those on a Wage subsidy scheme , numbering 382,000 in June, so if they are also added we arrrive at a grand total 1,041,822, with a peak of over 1,250,000 in April.

It is highly unlikely that everyone on a wage subsidy and in receipt of the PUP will end up unemployed so the 1 million figure is hopefully not reflective of things to come. At the other end of the scale it is not plausible that all will resume employment as before, so the official unemployment data may well start to tick up over the second half of the year. Nonetheless, estimates of the official unemployment rate for the year now look far too high , and it also may well be the case that unemployment on that definition will keep rising well into 2021, which again is contrary to the consensus .