Population and migration data highlight pressure on resources.

Estimating the Irish population in the years between census counts is tricky. The birth rate is known, as is the death rate, but migration flows are notoriously difficult to measure, so estimates are often revised when the census data is available. That is the case following the 2016 census, with net migration now much lower than previously thought, which also means that the prevailing post-crash narrative has to be revised, along with an acceptance that the economy faces overheating and capacity issues,rather than large scale underutilisation of resources.

That narrative  envisaged very large emigrant flows dwarfing immigration, with a net outflow between 2011 and 2016 of just under 100,000. That figure has been revised down, to 31,000, with net immigration turning positive again in 2015. Immigration estimates for the period have been revised up, by a net 27,000, but the biggest change is on the emigration side, with a downward revision of 40,000.

So fewer people left than generally believed and more entered than initially thought. What about the trend post-census? The CSO estimate that net immigration rose to 20,000 in the year to April 2017, up from 16,000 in 2016, which alongside a natural population increase of 33,000 brought the total numbers in Ireland to 4.79 million. This represents a 1.1% annual increase, following a similar rise the previous year, and on that basis the population will hit 5 million  in another four years, which is  much earlier than the standard official projections.

Pressure on resources has been evident for a number of years now, and these migration and population figures bring some hard evidence on the need for a big increase in Ireland’s economic capacity, in health, education, transport, infrastructure and housing. On the latter, population growth implies the need for a net increase in the housing stock of 22,000 a year, implying a  completions requirement of  32,000 a year ( given obsolesence), just to maintain a constant population/ housing ratio, let alone account for a trend fall in the numbers per household. We are unlikely to hit that annual  figure for another three or four years, implying a very substantial backlog and hence  the need for an overshoot in the annual requirement.




Population Pressure on Housing greater than thought

The CSO produced another set of surprising data today, at least to some, with the publication of preliminary figures from the recent census. The population had been estimated at 4.64 million as at April 2015 , implying an average annual rise of around 15k since the 2011 census. Consequently the 2016 census figure , at 4.76 million, was much higher than generally expected, with the total increase over the past five years at 170k, or around 35k per annum. The natural increase (i.e. births minus deaths) was put at 198k, with the residual, net migration, at just -28k. In other words there has been a net outflow from Ireland over the past five years but it is now seen as much lower than previously estimated; the CSO had put net emigration over the four  years to April 2015 at 100k. So the numbers emigrating may have been lower than thought  and/or immigration may have been higher, with the latter more likely, given past episodes of population underestimation.

This Blog has pointed to growing capacity constraints in Ireland, particularly in and around the capital, and these figures only serve to underline the point. On housing, the census reveals that the housing stock rose by just 19k over the past five years so what limited new construction we have seen has barely managed to offset depreciation.

The CSO points out that the growth in households (3%) has lagged that of population growth as a whole (3.7%) , indicating that the availability of housing is an issue. The census reveals that the vacancy rate of housing nationally , excluding holiday homes, has fallen to under 10% from 11.5% in 2011 and 12.5% in 2006. In the past houses were built in areas that people did not want to live so the vacancy rate varies wildly across the country, from well over 25% in Donegal and Leitrim to single digits in Dublin and surrounding counties. Indeed, if one excludes holiday homes (small in number) the vacancy rate in South Dublin is 3.9%, and below 6% in both Fingal and Dun Laoghaire Rathdown.

Trying to suppress the symptoms of excess demand for housing ( by, for example, capping rents) is not sensible in economic terms and the only solution is to build more.  Moreover, these figures imply that the consensus estimate for housing demand of 25k per annum is now too low, as net emigration  has been overestimated, and indeed may already have turned to net immigration.

Irish employment growth accelerates

The latest  Irish Household Survey, covering the second quarter of 2015, shows that the labour market continues to tighten and that job creation has accelerated again. Employment  ( on a seasonally adjusted basis) bottomed in the autumn of 2012 and picked up strongly in  the following year, averaging an increase of 15k a quarter, but then slowed sharply in the first half of 2014, with only 4k net jobs created. Employment growth  did pick up in the second six months, with a rise of 24k, and 2015 has seen a further acceleration: the numbers in work rose by over 15k in q1 and by 19k in q2, the latter the strongest quarterly increase since early 2007. Employment has therefore grown by some 57k over the past year, or 3%, and by 130k from the cycle low, although  still nearly 200k below the pre-crash high.

Virtually all sectors of the economy have generated additional jobs over the past year. The largest increase was in Construction ( 20k) , followed by Manufacturing (10k) with Financial services (6k) also showing notable growth. Education and Administration saw marginal falls, as did the Accommodation sector, perhaps surprisingly given the strength of tourism, although the decline followed a very strong rise in 2013.

The plunge in Irish employment from 2008-2012 also precipitated  a sharp decline in the labour force, fuelled by net emigration and a decline in the participation rate. That trend appears to be ending, with the rise in employment now prompting a rise in participation , particularly from those over 45, and a rebound in the labour force, which grew by 9k in the second quarter and by 14k on an annual basis.

The recovery in the Irish economy is also impacting migrant flows. The number of emigrants is still high , at 80k  in the year to April  from 81k the previous year, but immigration picked up, rising to 69k from 61k. As a result  net emigration slowed further, to under 12k from 21k in 2014 and a peak of 34k in 2012. The number of Irish nationals leaving fell to 35k from 41k, and to a net 23k (i.e. adjusting for Irish nationals returning). Only 10k of total emigrants classed themselves as unemployed with the majority having jobs, implying the decision to leave may have more to do with the rewards of employment in Ireland or quality of life issues. Yet  Ireland continues to attract migrants, with most now coming from outside the EU and leaving a job abroad.

The pick up in the labour force in q2 also resulted in a slowdown in the pace at which unemployment fell, to 7k , leaving a total of 207k. That decline was greater than indicated by the monthly data, which has been revised, as has the unemployment rate , which averaged 9.6% in the quarter from a peak of 15.1% in 2012. The unemployment rate for July is now put at 9.5%. This is below what the EU deem to be full employment in Ireland, which seems unlikely but if true, would imply some upward pressure on wages, which  are staring to rise, albeit modestly in the aggregate. The unemployment rate in Dublin is lower still, at 8.8%, which again would point to the prospect of some wage pressure in the capital.

Overall, a clear picture of strong job growth, falling net migration and a tightening labour market and one consistent with the pace of growth in domestic demand recorded in the national accounts.