Growth in the Irish economy in 2008 is forecast to be slower than in any year since 1992. As a result, virtually no change is anticipated in the numbers at work next year while unemployment is projected to rise to 130,000, its highest level for a decade.
These forecasts are contained in the latest Quarterly Economic Commentary by the Economic and Social Research Institute (ESRI), published today.
The ESRI has also reiterated its belief that, when final data is available, average house prices in December 2007 will be shown to be 15 per cent lower than a year earlier.
"We expect house prices to stabilise during 2008," the institute said.
The ESRI has pared back its growth forecast for the Irish economy in 2008 to 2.3 per cent from its previous figure of 2.9 per cent.
Underpinning the ESRI's downward revision of forecast economic growth in 2008 is a steeper-than-expected decline in house building activity next year.
It is also anticipated that weakening consumer confidence will translate into lower growth in consumer sales volumes in the year ahead.
The 2.3 per cent growth in real Gross National Product (GNP) now forecast by the ESRI for 2008 is half a percentage point lower than the 2.8 per cent growth in real GNP projected by the Government in the 2008 Budget just a fortnight ago.
The institute is also expecting a further population increase of 65,000 people or 1.5 per cent during 2008. As a result, real GNP per person is forecast to increase by just 0.9 per cent next year.
The ESRI anticipates that the steep slowdown in the pace of economic growth will cause a virtual standstill in employment in 2008 after years of substantial job gains.
The numbers at work are forecast to advance by just 8,000 in the year ahead, compared to an estimated employment increase of 61,000 in 2007.
However, the small change forecast in the overall level of employment masks two conflicting trends.
Reflecting the continuing weakening in the building industry, the number at work in the construction sector next year is forecast to fall by 20,000.
In contrast, an increase of 28,000 is projected for the number working in the services sector, the largest source of Irish employment.
The slower forecast rate of economic growth next year will also be mirrored in rising numbers out of work. The ESRI is forecasting that the level of unemployment will increase by 28,000 to 130,000 next year.
As a result, the unemployment rate - the number out of work as a percentage of the labour force - is expected to climb from 4.6 per cent this year to 5.8 per cent in 2008.
If the ESRI's forecasts prove accurate, unemployment in 2008 will reach its highest level for a decade. Unemployment, measured according to International Labour Office definitions, last exceeded 130,000 in the first quarter of 1998. Similarly, an unemployment rate in excess of 5.8 per cent was last recorded in the final quarter of 1998.
Weaker conditions in the labour market are expected by the ESRI to rein in the rate of wage growth during 2008.
The institute anticipates that wage growth will moderate from 5.5 per cent this year to 4.0 per cent in 2008.
The prediction comes as Fás, the national training and employment authority - also forecasting an upturn in unemployment next year - calls for a review of the minimum wage.
In a report issued yesterday, Fás warned that, in the light of the projected slowdown in employment growth, "the appropriateness of the national minimum wage will need to be regularly reassessed, taking into account the impact on competitiveness, unemployment, migration and poverty".
Siptu general president Jack O'Connor last night said the authors of the Fás report should be "ashamed of themselves" for suggesting the minimum wage should be reduced.
"They appear totally bereft of ideas. Resorting to crucifying the low paid and poorest sections of the workforce, they offer nothing whatsoever to address the competitiveness challenge," he said.