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 .

Irish Employment growth slows in final quarter of 2015.

The latest Irish Quarterly Household Survey, covering the final three months of 2015, revealed a surprising slowdown in the pace of employment growth; the increase  was just 4,700 or just 0.2%. Moreover, male employment fell in the quarter, by some 4,000, and  male unemployment actually rose. Total employment had grown rapidly in the first half of the year, by over 30,000, so the annual rise in the final quarter was still a healthy 44,000 (2.3%)  but forecasts for employment growth in 2016 may be  trimmed a little .

The labour force rose strongly in the quarter, by 9,000, and increased by 18,000 over the full year. The participation rate (the proportion of those over 15 in the labour force) is picking up again, albeit modestly. Net emigration  slowed to under 14,000 in the year to April 2015 and appears to have fallen further in recent months, so supporting labour force growth.

As a result of this interaction between employment and the labour force the numbers unemployed  in the final quarter fell only marginally, by 1.700 to 196,000. This was 26,000 lower than a year earlier, but again most of that decline was in the first half of 2015.

The unemployment rate also declined in q4, to 9.1% , but  the fall was modest, from 9.2% in q3. The former was  above the  previously published  monthly estimates , prompting a revision, with the result that the unemployment rate in January is now put at 8.9% instead of the original 8.6%.

The quarterly employment figures can be volatile and have shown unexpectedly soft readings before ( for example in early 2014) which have not proven the start of a trend. On that basis it would be premature to read too much in to this data, although it should be noted that Ireland is operating well above capacity, according to Department of Finance forecasts, and hence above ‘full ‘ employment , implying a large structural unemployment issue. That assumption may be wrong ,of course, but if true means that the unemployment rate may not fall as rapidly from here as the consensus predicts.

Irish unemployment falls below 200k, unemployment rate at 8.9%

The pace at which Irish employment collapsed during the recession surprised everyone, and now the pace of jobs growth is also much more rapid than generally envisaged  a few years ago. Seasonally adjusted employment grew by 29k during 2014  and has picked up momentum in 2015,  rising by 43k over the first three quarters of this year. That takes the total increase over the past three years to 140k,  leaving total employment in the third quarter of 2015 at 1.98 million and  2.9% above the figure a year earlier.

Most industries have seen employment grow over the past year, notably manufacturing (+14k) and construction (+15k), with the latter total now at 127k from a cycle low of 96k, although still  a long way from the cyclical peak of 274k. Financial services saw one of the few declines, alongside retail, but the general picture is of an economy in which  the growth of domestic spending is translating into  robust demand for labour,

The labour force   is also responding to the changed environment, and although broadly flat in the third quarter has risen by some 13k over the past year. That was dwarfed by the annual  rise in employment (56k) so the numbers unemployed fell  by 43k  and by a seasonally adjusted 9k in the quarter. That left the total unemployment figure  at 197k, the first sub-200k reading since the  final quarter of 2008.

The  CSO estimated the unemployment rate in q3 at 9.1% , again the lowest in seven years. Moreover, the initial monthly estimated unemployment rate for the quarter had been put at 9.5% and has consequently been revised lower, leaving the October estimate at 8.9% from the initial 9.3%.

The Irish economy , as captured by real GDP, actually bottomed out in the final quarter of 2009 and recent data revisions show that it grew in every subsequent year, albeit marginally in some cases. Yet the general public  did not perceive a recovery ,in part due to the absence of employment creation. That has well and truly arrived and the tightening labour market is likely to generate general upward pressure on wages, which is already appearing in certain sectors of the economy.