Tuesday, 15 March 2011

Unemployment highest since 1989

Slí Eile: Involuntary unemployment is long recognised as both the enemy of human dignity and a huge waste of human potential capital. The latest data on unemployment from the Central Statistics Office here indicates a worrying growth in unemployment. There has been a significant increase in the rate of unemployment in the last quarter of 2010 over the previous quarter of 2010.
Seasonally adjusted the rate went up to 14.7% (from 13.7%). At a rate of 15%, the rate is now almost three times what it was three years ago before the crash of 2008. To put this context unemployment is now approaching the level last seen in April 1989 (when the rate was 15%). The rate was at its highest in 1985 and 1986 (at 16.8 annual average % rate).
However, the CSO offer yet another very telling statistic. It is referred to as ‘S3’. It refers to: “Unemployed plus marginally attached plus others not in education who want work plus underemployed part-time workers as a percentage of the Labour Force plus marginally attached plus others not in education who want work.”
In plain language it is the number of those out of work together with those who would work but have given up looking. This figure comes to 23% of the total potentially available to work. Add to this a large figure by way of net outward migration. In the 24 month period up to April 2010 an estimated 130,000 persons emigrated from Ireland. However, this was balanced by an inflow of 88,000 according to the latest CSO estimates here.

The estimated net outflow over those two years was therefore in the order of 42,000. It should be possible to firm up these estimates once the results of the 2011 Census of Population are known later this year.
A major problem is the growth in long-term unemployment to over 50% of the total at 7.3% in the fourth quarter of 2010. In other words there was an estimated 154,000 persons unemployed for more than 12 months and still living in Ireland.

The position of young people – especially those who have left school early is perilous. Take the data here which show that one in two young men between the ages of 18 and 24 who have left school early (without a Leaving Cert or equivalent) and are still living in Ireland is seeking work. A further one in four is in a job while the remainder is not ‘economically active’. For young women aged between 18 and 24 one in two is not ‘economically active’ while one in four is seeking employment.

As part of the drive to shrink the public sector Governments are committed to reducing numbers in the public sector. So far, the reduction is significant. Based on data in Table 1.1 of the latest CSO release, the numbers are down by 24,000 since the end of 2008 (from 427,000 to 403,000 in December 2010). Most of this fall occurred in 2009 (20,000) and 4,000 occurred in 2010. Government is committed to a further reduction of 25,000 (although the size of the public sector here is less than elsewhere according to the latest OECD data on public sector employment).

In Quarter 3, unemployment, here, was 6th highest in the EU. The broad public sector was, traditionally, a major employer of school leavers, apprentices and graduates. Not any more. The theory of crowding in of private investment, export led growth and rising market share as taxes, wages and other costs are reduced constitutes the long-term FF-IMF-EU plan to get the economy moving and jobs coming on line again. The new Government has promised fast action and the creation of a ‘Jobs fund’ within 100 days of coming to office. Time will tell. The signs from the grocery, banking, pub and manufacturing sectors are not good as further shake-outs are in prospect. In the meantime, economist Morgan Kelly’s apocalyptic forecasts made in January 2009 of unemployment soaring to 15%, 20% wage cuts and tumbling house prices are not so fanciful after all. That was before we knew something of the scale of zombie banks. And we are far from turning the corner.


Rory O'Farrell said...

What I found most interesting in the QNHS is the stability of employment in the Accommodation and Food sector. This shows there is no justification for a cut in wage rates in these sectors.

For some reason there was a bump in employment in the sector in Q4 2009. Can anyone provide any explanations?

Michael Taft said...

Rory - This is just a guess but some of it would be down to seasonal factors. Hospitality businesses take on more staff in the run-up to christmas and new year because of increased custom. This is what makes the current report so concerning - there was no seasonal jump, though some of this would have been due to the freeze. But your main point is well taken - over the last three years employment in the hospitality sector has remained remarkably steady; though we might see movement in the sector with hotels, etc. losing employment and fast-food sectors gaining.

Rory O'Farrell said...
This comment has been removed by the author.
Rory O'Farrell said...

I don't think its seasonal factors.
Employment in Food and Accommodation was

Q4 08 115.3
Q4 09 120.4
Q4 10 112.8
(This is seasonally unadjusted, but only compares 4th quarters)

So its basically the same level as Q4 08.

Interesting too that Irish national employment in this sector actually increased over the past year by 2,800 but decreased by about 10,000 for foreign nationals, highlighting that they tend to have more precarious work.

I suppose the big freeze is an important factor.

Slí Eile said...

Thanks for these useful observations. Yes, the Accommodation and Food sector presents curious trends. It is necessary, however, to stand back from the detail for a moment. Looking at trends in total numbers employed between Q4 of 2007 and Q4 of 2010 shows an overall % decline of 14.8% over all sectors of the economy combined. The corresponding % decline in Accommodation/Food sector is very similar at 14.2%. Now compare the 12 months ending December 2010 and the fall is higher in the Accommodation sector at 6.3% compared to 3.4% overall. Typically, seasonal employment peaks in Q3 in the Acc/F sector. The fall between Q3 and Q4 of 2010 in this sector was very sharp (8% of 3% when seasonally adjusted). One possible clue is that the sector held on to workers longer than other sectors but the combined deflationary impact on discretionary consumer spending has gathered pace in 2010 and we now see the effects.
The bulk of job losses since Q4 of 2007 has been in Construction (over 150K) and in Wholesale/Retail (45K). Together these two broad sectors account for almost two thirds of all job losses (totally 315K) over the last 3 years.
The composition by nationality is puzzling. Possibly other nationals have been leaving due to family units leaving and these have been replaced by Irish nationals while at the same time overall employment is falling this sector.
Incidentally, the trends in public sector employment are interesting. Health and Education increased over the last 3 years but in Health the data show decline - at last - in Q4 of 2010.
The new Govt will find it extremely difficult to cut numbers in these two sectors. Most of employment is in front line services. Moreover, most of the involuntary potential has been used up. To deliver on 25,000 they will have to slash central admin numbers because front line services continue to rise or stay level with demographic pressures on all fronts.

Rory O'Farrell said...

I suppose one part of the Accommodation and Food story that isn't told is hours. Perhaps in Q4 2009 lots of people were hired working just a few hours a week, while people who were working longer hours were laid off. Just a possibility.