Recent Irish economic indicators have, in the main, been remarkably strong. With reopening just getting under way, how is this happening and what does it mean for the jobs market, hit so hard by the pandemic?
1. The hidden sectors:
The sectors which have been kept growing during the pandemic – some of them growing strongly – are mainly lower profile ones. We have been looking, until very recently, at the shuttered shops and the closed bars, but less visible big manufacturing and service sectors have largely continued through the pandemic.
The latest data confirm this, even if the impact of the pandemic means they should not be interpreted too literally.
In broad terms, the sectors which have reopened are bouncing back and those which never closed continue to grow.
Looking at this week’s industrial production data, output from the modern industrial sector, dominated by multinationals, was 25 per cent higher in the three months from February to April this year compared to the same period last year.
Most of these companies stayed open right through the pandemic. One quirk here is that data from the pharma sector is not released for confidentiality reasons, so it is hard to see if this is still the driver.
The traditional sector – dominated by Irish businesses – was up 12 per cent, though some of this sector was closed during the first lockdown.
Turnover across industry was 8.1 per cent higher in the most recent three months, compared to the preceding quarter.
The services sector is also bouncing back, with the CSO’s services index showing activity rising in April and now 23 per cent above the same month in 2020 – and this was before the more recent reopening of personal services in mid-May.
Even before this, domestic services were showing signs of bouncing back, while digital services, led by major players like Google, Facebook, LinkedIn, Microsoft and so on, have kept growing all along.
By April the domestic services sector was, remarkably, just 3.9 per cent below its April 2019 – pre-Covid – level, while the ICT sector was 24 per cent ahead.
We are starting to see this reflected in the jobs markets, where hiring is strong. And the numbers on the PUP have fallen by around 100,000 from their 2021 lockdown peak to 285,000 – and should continue to decline in the weeks ahead.
Still, it remains to be seen how many stay on the payment after most of the reopenings are complete and some 300,000 people also remain reliant on wage subsidies.
Overall, with strength in higher-paid sectors, income tax receipts are rising and were 6.2 per cent ahead on an annual basis in the first four months of the year.
2. The economy adjusting
There are clear signs of economic activity adjusting as the pandemic has gone on. This is most clearly evident in consumer behaviour, where increasing numbers of people have, for example, found ways of shopping online even when physical stores were closed.
Almost half of all clothing and footwear purchases were conducted online in April and more than one third of department store sales. This keeps economic activity and tax revenue growing, though raises obvious questions about the drift away from physical retailing in the longer term.
The latest exchequer returns reflected this, with VAT receipts ahead of expectations and presumably set to bounce as more sectors reopen.
Consumers have adapted to new ways of shopping, according to Peter Vale of Grant Thornton, in a comment on the figures, and VAT receipts should come in well ahead of 2020 levels, despite some ongoing consumer caution.
3. The jobs recovery
Analysis of the jobs market has been dominated by the numbers on the PUP and wage supports – still around 585,000 – and the risk of many not getting back to work as the economy reopens. And this is perhaps the key economic challenge after the pandemic.
But what about the wider jobs market? Here the signs are strong. "The pause button was turned off in January and people have started hiring," according to Trayc Keevans, global FDI director at recruiter Morgan McKinley, who is involved in hiring for multinationals.
Looking at the jobs market more generally, data from jobs website Indeed shows postings in Ireland growing at a "brisk clip" in recent weeks and now 3.6 per cent above the pre-pandemic baseline.
Much of this is led by the “reopening” sectors – beauty and wellness, retail and now hospitality. There is undoubtedly a rehiring impact here as closed sectors reopen, but the number of postings is still striking.
Looking at the multinational dominated sectors, Keevans identifies a number of key areas of strength, including in science sectors such as bioprocessing and biotech, transport and logistics (which has got a pandemic boost), and the traditionally strong ICT sector, where project development staff, cybersecurity and data analytics are all strong.
Related to the pandemic, she sees demand for experienced HR professionals, given the complexity of the post-Covid workplace, and huge demand for multilingual staff from many employers, with many workers having returned home during the pandemic and not returned – as yet anyway.
This is also a factor in the transport and logistics sector. In some sectors, Irish- based employers are facing competition from foreign employers looking to the Irish market in areas like biopharma. Keevans says that in the multinational sectors, Dublin and Cork in particular are booming.
Looking at the more domestically focused sectors, Jack Kennedy, EMEA economist at Indeed, points out that city centre jobs markets continue to lag behind as many people continue to work from home. Jobs postings in Dublin are still 10 per cent below their pre-pandemic level, he points out.
“This is in keeping with trends across European capital cities, which have generally lagged their national economies, with custom-facing sectors like beauty, food and hospitality particularly hard hit in city centres.
So it seems we have a two-tier market, with the multinational sector growing strongly and a decent pipeline of new projects on the way in the months ahead. Meanwhile the domestic sectors which have been closed are reopening and hiring, though how this will balance out remains to be seen.
4. The outlook
The signs from the economy and jobs market are encouraging. Given the shock to the economy there will certainly be mismatches in the months ahead, with unemployment in some sectors and parts of the country and jobs shortages in others.
In some cases reskilling can allow people to move from a shrinking sector to a growing one, but in many cases this isn’t possible.
And many sectors are facing the problem that staff have moved on to other sectors or back home in the case of overseas employees, so the supply side of the economy has been hit by a shock from which it will take some time to recover. And there will be many thousands of people who will realise that their old jobs is not coming back and a big job for the State in supporting them.
This will be easier if growth in many sectors remains strong. And for now, the indicators in many areas of the jobs market are positive.