Economics: The Irish jobs market has survived remarkably through the past difficult year, writes Cliff Taylor, Economics Editor.
Despite slow international markets, the end of the boom at home and the competitive hit from a rising currency, unemployment has remained low and there has been no sign of a big shake-out in employment.
So do the weakish result's of this week's Quarterly National Household Survey from the Central Statistics Officer represent a harbinger of a poorer jobs trend, or are they a "blip" before the benefits of the international economic recovery kick in?
On the face of it the figures aren't too bad. Total employment rose by 26,000 in the year to July and the unemployment rate of 5.2 per cent is still low by international standards.
Dig a little deeper, however, and the figures do suggest a weakening in the jobs market. Unemployment is on the rise, up 12,200 on the same period last year and a 6,000 increase on the previous quarter, after adjusting for seasonal trends. The quarterly figures are based on survey data and thus differ from the live register, which is based on benefit claimants.
While total employment remains well ahead of last year, the seasonally adjusted total fell by 6,000 in the June to August quarter, when compared to the previous three months. The employment figures also show a pick up in part-time work, which accounted for 16,300 of the increase over the past year, compared to a 9,500 rise in full-time jobs.
Part-time employment rose by 5.6 per cent over the year, while full-time employment increased by 0.6 per cent. The CSO figures show a fall in the average working week to 37.4 hours from 37.8 hours one year ago. Multiplying the hours worked by the numbers in employment gives a crude indication of what the CSO call the "volume of work", which increased by just 0.3 per cent between mid-2003 and mid-2004, probably an accurate reflection of a flat economic picture.
What else can we glean from the figures? First, it is clear that manufacturing industry has had a difficult year. It was the main area of weakness, with a 9,600 fall in the twelve months to mid-2003, the vast bulk of it coming in the latest quarter. Declines were also recorded in agriculture (-4,700) and transport,storage and communications ( -3,100). Industry has suffered from, declining cost competitiveness - exacerbated by a rising currency - and from low growth in many overseas markets.
The flip side of the difficulties in the manufacturing sector are new jobs in health- up 14,000 on the year - construction( up 7,000) and hotels and restaurants ( up 7,700). The construction sector has been boosted by the growth in house-building, while some 40 per cent of the jobs growth in both health and hotels and restaurants sectors was in part-time employment.
What do the figures tell us about likely future trends in the jobs market? The trick here is to try to judge the breakdown between cyclical trends and structural factors. The cyclical element should be improving: there are signs of international recovery; the latest Irish GNP figures show a second quarter recovery, which could be expected to knock on to the jobs market; and the live register unemployment total has fallen by 8,000 since July.
Structural trends are,by their nature, a bit harder to spot. But they are there. Take, for example, the continued decline in plant and machinery operatives, down 15 per cent over the past two years to 170,000. This is a signal of a changing competitive landscape in manufacturing, which is set to continue as lower-skilled jobs increasingly move to cheaper locations in Eastern European and the Far East.
The other side of the coin is strong growth in professional and personal services, both up by 10 per cent plus over the past two years. This reflects partly dynamism in the private sector, but also rising public sector job numbers. While the former will presumably continue, the Government has promised to reduce public sector employment by 5,000 over the next three years. This will slow the increase in overall services employment.
Looking at the other main sectors, employment in the wholesale and retail trade has changed little during 2003 and at 253,000 is up around 3 per cent over the past two years, while employment in financial and business services has shown little change over that period from its current level of 226,000.
So where will future jobs growth come from? Predominantly from the services sector, it appears. The question here will be the balance between higher level jobs and more lowly paid and often part-time employment. The planned job cuts in the public sector will restrict the supply of the former.
The construction sector will continue to be supported by the need to build new houses and by infrastructure programmes. However the level of new house building has probably now peaked and the sector would do well to hold or add modestly to the considerable recent gains.
For manufacturing industry, meanwhile, the challenge will to be replace the inevitable eastwards drift of lower value jobs with higher value production.
There have been successes in this area. But the recent National Competitiveness Report, showing continued low spending here on research and development, does raise question marks about our aspirations to become an innovation driven economy, with implications not only for manufacturing but also for the higher "knowledge-based" end of services. And there are also considerable challenges in building growth in the indigenous sector in an era when job creation from inward investment may wane.
The latest figures are not a cause for gloom. The jobs market here is healthy by any standards. However they do suggest that the expectation that more rapid international growth will automatically translate into a big uplift in job creation may be over-optimistic. Recent losses in price competitiveness will not help and mor will continued problems in areas such as infrastructure and congestion. We are starting from a good position, but we face a fight to retain the strong employment gains of recent years.
