Employment data give reason to be cheerful

ECONOMICS: Despite the global downturn and a stagnant domestic economy, the number of people at work here has risen by 28,400 in the past year, writes Cliff Taylor.

It's probably a little sad to start a column by saying "older readers will remember". But, anyway, older readers will remember that for some years during the 1980s the economy suffered from a phenomenon known as "jobless growth", when gross national product (GNP) figures indicated that the economy was growing but employment levels were static or falling.

For the past year or so we seem to have had the opposite - something of a job-creating downturn. Perhaps downturn is overstating it - what the GNP figures indicate is a fairly stagnant domestic economy, while adding back in multinational profits, gross domestic product (GDP) grew strongly last year, but has also slowed sharply in 2003.

Yet employment keeps on growing.The total number of people at work has risen by 28,400 over the past year and even managed to rise by 6,300 during the difficult second quarter of 2003. Unemployment, as measured by the quarterly survey, remained remarkably low at 81,400 and pretty much held steady from the previous quarter, after account is taken of normal seasonal trends.

There are some caveats, but none that change the overall picture. Some 12,400, or 44 per cent, of the employment increase in the past year was accounted for by a rise in part-time work. And much of this - 8,800 to be precise - was accounted for by a rise in student part-time work. (Student work usually falls off in the second quarter running up to exams, but that didn't happen this year).

The unemployment figures in the survey also need to be put in context. At first glance, they appear to conflict with the live register data, which were running about 10,000 on average above 2002 levels in the March-May period when the national survey was taken.

The labour force survey may underestimate "real" unemployment a little, as it counts only people who say they are ready and willing to work and actively looking for a job. However, the live register is not a completely accurate measure either - it is a total of benefit claimants and is not designed to measure unemployment per se.

What do the figures tell us about overall economic trends?

By any standards, the performance of the jobs market has been impressive. Total employment is falling in most other euro-zone economies but has held in remarkably well here.

At least part of this is due to flexibility and adjustment in the face of the international downturn.In some places part-time jobs replaced full time ones. Interestingly working hours shortened to 37.2 per week on average in the second quarter of this year, compared with 37.7 at the same time last year. Multiply the numbers in work by the total hours worked and the total shows a minor 0.27 per cent increase over the year, probably a reasonable reflection of overall economic condition.

Shorter working hours have undoubtedly hit incomes in some households - as has the disappearance or shrinkage of bonus payments. But this is infinitely preferable to an economy which adjusts by shedding jobs completely.

Some sectors remain strong. Boosted by housing demand and low interest rates, employment in the construction sector has risen by 10,500 over the past year. Health jobs continue to rise, up 10,900 annually. Meanwhile, the complaints of the tourist industry look a bit hollow against a 10,500 rise in hotel and restaurant jobs, even if some of this represents a bounce back from post September 11th, 2001 cutbacks.

The previous quarter's figures had shown that pretty much all the increase in jobs was due to a rise in public sector numbers. But there are now signs that public sector jobs growth slowed significantly, moving through this year as the Budget cap on numbers started to bite.

Encouragingly, in the second quarter at least, some other sectors took up the slack and even manufacturing, where jobs have been shed fairly heavily in recent years, held in reasonably well with just a small recorded fall despite the dreadful environment for exporters.

The performance of the jobs market is encouraging; excluding agriculture, total private sector employment rose by almost 19,000 over the past year. The real measure of the economic boom was the 600,000 increase in employment over the past decade to close to 1.8 million. Given that a key challenge against a difficult international background is to hold on to the gains of recent years as much as possible, the positive trend in overall employment levels is a very significant plus on the economic balance sheet.

The latest employment figures were published shortly before revised data showing that US economic growth was running at a healthy annual rate of 3.1 per cent in the second quarter of this year. So is it all onwards and upwards from here?

It is still too early to sound the all-clear. A string of industrial job loss announcements over the summer months are likely to continue into the autumn. And the resulting rise in the live register will be reflected sooner or later in the labour survey figures, notwithstanding the way the two series can diverge for a period.

Also, the positive impetus from rising public sector employment will peter out in the months ahead, provided the McCreevy cap is adhered to. And there are signs that consumer confidence ebbed in recent months, which may affect spending and jobs in areas such as retail and restaurants.

It would be a remarkably good performance if total employment here could hold around current levels for the rest of this year. Many businesses are still squeezing costs down and trimming employment levels. Indeed, the Central Bank has warned that some may even have been "hoarding" jobs - holding on to employees they don't need at the moment in the hope of a recovery. If this is true, then increasing growth will be reflected for a period more in productivity increases than in rising employment.

Meanwhile, there are still real questions about how our declining competitive position - in all its aspects - will affect our performance when the upturn does arrive and in the longer term.

We are likely still to face some difficult months ahead. Jobs will remain under pressure and unemployment is likely to rise further, as we wait and hope for the international upturn to be sustained.

Looking back at figures since the late 1980s, it normally takes GNP growth of 3 per cent plus to have any sustained impact in terms of significant rising employment and sustained falls in unemployment. Does the experience of the last year, when the overall level of GNP has hardly changed and employment rose by 28,400, change this calculus?

Possibly not. But the latest figures do show a remarkably resilient jobs markets. And they do suggest that the impact of the international downturn on employment here may well be less than had been feared.

Fingers crossed for the next few months, which will tell a lot.