Hard to talk plausibly of recovery as data points to stagnation

ANALYSIS:After perking up earlier this year, the economy is now standing still on a host of fronts, writes DAN O'BRIENEconomics Editor

IT IS increasingly difficult to talk plausibly of a recovering economy. The accumulated data body, swollen yesterday by a number of significant releases, whiffs of stagnation.

After perking up earlier in the year, yesterday’s jobs and retail sales numbers, combined with a new survey of sentiment among companies’ purchasing managers, and earlier exchequer figures, all demand that one conclusion is reached – which is that the economy is standing still.

Start with joblessness. In August, it edged higher, for the fourth consecutive month. It now stands at 13.8 per cent of the workforce.

The number claiming out-of-work benefits, which is a separate but correlated measure, also crept up. If there is any solace, it is that the seasonally adjusted increase in both joblessness and welfare claimants in August was the smallest since April. Cold comfort.

Some 37,000 people signed off the unemployment rolls in August. That is not usual. In fact, it was one of the lowest monthly numbers of sign-offs since these figures were first collected last October.

Chart 1 shows the numbers signing on and signing off. These numbers are seasonally unadjusted. In August, the two figures were almost identical.

Economists call these inflows and outflows “churn”. Non-economists often don’t realise how much labour markets churn. This offers some hope. There is quite a lot policy can do to raise the numbers signing off. This includes assisting claimants with job searches, appropriate training, and a more credible threat than currently exists of benefit withdrawal if someone turns down an offer of work or training.

More can and must be done in these areas if long-term unemployment is not to be endemic. As Chart 2 shows, the numbers of people claiming benefits for more than a year has accounted for all of the increase in the total since late in 2009. Almost one in three of the total is now in this category. All the evidence shows that the longer someone spends out of work, the harder it is to find a new job.

Who is joining the dole queues? Figures on claimants by occupation for August show a continuation of the trends observed when this new series was published for the first time a month ago. In August, most categories of white-collar workers continued to suffer. As Chart 3 makes clear, over the past 10 months they have been signing on in much larger numbers.

It also shows that there has been only a very small percentage increase in the number of craft workers receiving benefits. In August, the figure actually fell, even if one in four of all claimants still comes from this sector.

Yesterday’s labour market numbers related to August. Yesterday’s numbers on the retail market were less up to date. In July sales fell again. As Chart 4 shows, they are now plumbing the depths reached at the end of last year. It is understood that the Department of Finance figures on consumption taxes for August are marginally positive. This suggests – and only suggests – that retailing held its own last month, breaking with the four-month declining trend up to July.

A third release yesterday came not from the Central Statistics Office, but from NCB stockbrokers. Their survey of manufacturers’ purchasing managers in August shows a second consecutive month of declining sentiment. Although the reading suggests that the sector is still growing, it is anaemic growth.