Peak employment isn’t all it’s cracked up to be

CSO statisticians caution about putting too muck stock in peak employment number

 

It’s not that most statistics are made up; it’s just they can skew the picture if used too sparingly.

Based on current growth rates, employment in the Republic will surpass 2.237 million, the all-time peak recorded in the final quarter of 2007, sometime later this year. Doubtless this will trigger a slew of headlines highlighting the fact that we have finally recovered all the jobs lost in the crash.

But when you dig down into the numbers, comparisons with 2007 get more slippery. For one, we had a smaller population and a smaller workforce back then.

So while we may soon find ourselves back at peak employment in absolute terms, the actual employment rate – the proportion of people in employment – will still be significantly lower than pre-crash levels.

Currently it’s about 68 per cent; back then it was 72 per cent. The ratio figure is more important than the volume one for obvious reasons; having a greater percentage of people working is better. In Spain, there are millions more people at work than in Ireland, but the jobless rate there is above 17 per cent.

While Ireland’s labour force participation rate is increasing, it remains low by international standards despite the rapid turnaround in headline employment. In its recent report on Ireland, the OECD noted that employment rates were particularly low for young, less educated individuals, and cautioned that some aspects of the social welfare system acted as a disincentive to participation.

There’s a circular relationship between jobs and population. When you create more jobs you attract more people and the pick-up in net inward migration is evidence of this. But when you have more people, you get more jobs; not necessarily as a result of economic progress, but simply because the market for things like services is bigger. Hence patting ourselves on the back for returning to peak employment with a bigger population may be misplaced. Times have changed, and so have the metrics of success.