Northern economy may have turned the corner but job prospects still gloomy

BELFAST BRIEFING:Northern Bank says key industry sectors are showing improvements in economic activity

IS THE worst of the recession really over in the North? At least one of the largest local banks believes it might be, according to forecasts to be published today.

Northern Bank claims there is some evidence to suggest the economy is now staging a “weak recovery”.

Although the bank predicts unemployment will continue to increase, it says key industry sectors are “experiencing improvements in economic activity”.

Angela McGowan, Northern Bank’s chief economist, believes all the indicators suggest the North has “turned the corner” with regards to the economic downturn, but she is not about to start celebrating any miraculous overnight economic recovery.

McGowan says the road to recovery will be challenging, with everyone from consumers to businesses and government all facing financial pressures.

She believes economic activity will marginally improve in the third quarter of this year, which she hails as a significant step forward for the local economy.

“We will have to wait until next year for positive year-on-year growth, which we estimate will be 0.3 per cent on average in 2010,” she says.

“However, the overall health of the local economy in quarter three this year is encouraging, with signs of incremental improvements.”

Northern Bank’s latest quarterly forecasts provide a glimpse of exactly which sectors are winning the battle against the economic slowdown.

Job losses have hit every industry in the North but two have escaped virtually untouched.

Both the public and health sectors are in remarkably good shape, according to Northern Bank’s latest findings, which show public administration bucked the global economic slowdown and delivered very modest growth in quarter one this year.

How it is going to fare in the short term is a matter of debate given the impending public spending cutbacks predicted for the UK as a whole, but it is in pretty good shape at the moment.

When it comes to the health sector, it is also clear to see that the significant level of funding it has received from the local executive has helped insulate it to a certain degree from the economic turmoil of recent months.

Employment has remained virtually unchanged in this sector and Northern Bank highlights the North’s growing aging population as of one of the key drivers for its continual strength.

The bank does not expect the health sector will completely escape future financial pressures but overall it believes it will remain heavily funded and a key contributor to job growth.

Aside from the public and health sectors, the North’s education sector has also remained resilient to the recession. There have been no significant job losses in the short term and, although there may be question marks over long- term funding plans, education is likely to benefit from strong cross-party support and remain pretty robust.

There is no doubt that other key sectors such as manufacturing, traditionally one of the biggest employers in Northern Ireland, construction and financial services have been among the hardest hit by the recession.

Even with the benefit of exchange rate fluctuations, construction-related sectors have suffered the most difficulties of all and there is little prospect of any improvement on the horizon for businesses in this sector.

Northern Bank’s research suggests the pace of decline in the manufacturing sector is slowing and the fact that major employers have “retained a presence” in the North, despite the ongoing difficulties, is a positive indicator for the future.

Overall the construction sector remains the weakest of all. The only possible upside identified by Northern Bank is that the housing market is not getting any worse and the sector is beginning to see some benefit from the fact that small-scale development projects are now getting under way again.

The bank believes that the sectors which are likely to struggle most, aside from construction, in the short term could be distribution, hotels and retail.

It suggests the hotel sector will continue to suffer from a decline in consumer spending, while the retail sector may experience a fall-off in customers from the Republic as price cuts there start to have an impact.

Northern Bank also highlights that any change in the current strength of sterling will have a significant impact for many sectors.

Regardless of the bank’s assertion that there is a slight improvement in economic circumstances, there is no positive spin on employment prospects generally. McGowan readily concedes that many people and businesses will feel the impact of the recession in the North for some time to come.

“Unfortunately, improvements in economic activity will not deter further job cuts in the months ahead and the labour market is expected to continue contracting even when economic activity picks up,” she adds.

This is a prediction best illustrated by the response Tesco had when it advertised for extra staff for its largest store in the North.

According to Tesco, more than 1,500 people applied for just 92 new jobs at its Knocknagoney store in Belfast, proving that shopping around for jobs is a luxury no one in the North can afford at this time.