Unemployment falls to fresh 20-year low despite slowdown in activity

Unemployment fell to 4.3 per cent in December, another two-decade low, despite the souring economic outlook.

This was down from 4.4 per cent in November, and from 5.1 per cent 12 months ago. Central Statistics Office (CSO) figures, published on Wednesday, indicated there were 114,500 people classified as unemployed in December, compared with 117,000 in November.

This corresponded to annual decrease of 18,600. While consumer spending and investment have slowed in the face of inflationary pressures, the Irish labour market remains resilient. An unemployment rate of 4 per cent here is considered to equate to full employment.

“The labour market will start the new year from a strong position to weather economic headwinds in 2023,” Jack Kennedy, economist at global recruitment website Indeed, said.

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While he said the latest decline was encouraging, Mr Kennedy sees the coming months as crucial in determining how the economy will perform, as the Russian invasion of Ukraine and the cost-of-living crisis continue to weigh on the Republic.

One concern is the increasing rate of inflation, driven by higher energy costs, he said.

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“With the cost of living rising, employers are bracing themselves for growing wage demands at the start of the year,” said Mr Kennedy, noting that Indeed’s latest wage tracker indicated a slowdown in wage growth.

“Slowing wage growth suggests a reduced risk of a wage-price spiral, giving central bankers more leeway to moderate the pace of interest rate hikes.”

The labour market will start the new year from a strong position to weather economic headwinds in 2023

Mr Kennedy also noted that increased participation has emerged as one of the main drivers behind the rapid rebound in the Irish labour market.

“This was driven by an increase in participation rates particularly among females and youths, as well as the rise in flexible working arrangements.”

The participation rate is a measure of the economy’s active workforce, in other words those working and those seeking work. The participation rate for males was 70.8 per cent in the third quarter of 2022, compared with 58.9 per cent for women.

Before the pandemic, the participation rate for women was 56 per cent. One of the most striking features of the Covid crisis was the increased number of women in the workforce, suggesting that the shift to remote working facilitated greater participation.

There were more than 2.55 million people in employment in the third quarter of 2022, a record level.

“As demand for employees remains high, it makes sense to further explore what can be done to tap into those would-be workers who would like to get jobs but face barriers,” Mr Kennedy said.