Fas forecasts 8.1% unemployment

STATE TRAINING agency Fás predicts unemployment may exceed 8 per cent next year and warned the downturn may extend into 2010 if there is no significant improvement in the economy.

In its quarterly labour market commentary published yesterday, Fás said it had revised its unemployment forecast for 2009 upward from 7 per cent to 8.1 per cent.

It said the revised forecast was prompted by a rapid rise in the numbers signing on to the Live Register, up 42 per cent or 72,000 so far this year, and the general deterioration in economic conditions caused by the financial crisis.

The agency predicted the unemployment rate would reach 5.7 per cent by the end of the year.

It said labour demand in the economy had "weakened appreciably" and the agency's own data reflected as much. Vacancies notified to Fás in the first nine months of the year fell by 24 per cent year-on-year, it reported.

The most notable declines were in transport-related occupations, which fell 50 per cent, IT and construction vacancies, which fell 43 per cent, and retail sales position, which were down 26 per cent.

The agency said new apprentices entering the workforce were down 39 per cent so far this year, with construction-related apprentices down 54 per cent.

"While the downturn in the construction sector has been the main reason for the employment slowdown thus far, there are clear signs that the deterioration in economic conditions has begun to impact the services sector, especially financial services," it said.

The contraction in the labour market would also have a significant impact on migration flows resulting in net emigration of 27,000 next year, it forecast.

Weaker labour demand had already resulted in a slowdown in earnings growth, which, Fás said, was negative across all sectors, with the exception of banking and finance.

Fás economist Brian McCormick said: "Given the current level of economic uncertainty, employment forecasts beyond 2009 would involve heroic assumptions that have no certainty of materialising.

"Nevertheless, in the absence of a significant upturn in the world economy, a further contraction in labour demand is, at this early stage, the most likely scenario for 2010."