FAS predicts marked rise in unemployment

The recent spate of job losses is only the beginning of a likely marked rise in unemployment, FÁS has warned.

The recent spate of job losses is only the beginning of a likely marked rise in unemployment, FÁS has warned.

As long as the slowdown continues, the number of people losing their jobs is likely to increase at an accelerating rate, the agency says in its quarterly labour market commentary.

An indication of the rapid turnaround in the jobs market is provided by the fact that employers are no longer concerned about labour shortages. This problem, says FÁS, has "all but disappeared" in just over 18 months.

The quarterly review, prepared by FÁS economist Mr Brian McCormick, says the sharp fall in economic growth has yet to be reflected in the unemployment figures.

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"Nevertheless, the longer the slowdown persists, the greater the probability of a more pronounced increase in unemployment."

Employers, says the review, have adopted a "wait-and-see" attitude to the economic situation by cutting down on overtime.

"Underlying this practice of 'labour hoarding' is the expectation that the economy will recover in the near future. However, the slowdown in the world economy looks set to continue in the short term."

The appreciation of the euro against both the dollar and sterling will also increase the pressure on Irish firms to reduce payroll costs, the review points out.

The likely result is that "labour hoarding" will be replaced by a "more marked reduction in staff numbers".

"Indeed, the increase in the numbers on the live register during the first half of this year suggests that this process may have already begun."

Although employment growth continued to be quite strong into the early months of this year, this was largely due to significant growth in public-sector staff numbers, the review says.

However, "given the public-sector recruitment cap, the public sector can no longer be relied on as a source of economic growth".

Employment losses in the first quarter of this year were greatest in the agriculture and manufacturing sectors, which lost more than 14,000 workers from a total of about 415,000.

Manufacturing job losses were not confined to traditional, low-tech enterprises. Employment in electrical manufacturing, for example, fell by 8,400.

Overall, the average unemployment rate for 2003 is expected to exceed 5 per cent, possibly reaching 100,000 by the end of the year, says the review.

Unemployment levels, it points out, continue to compare favourably with the EU average of 8.1 per cent, and are lower than might be expected in the economic climate.

FÁS says the problem of shortages of workers has all but disappeared since the beginning of 2002, "suggesting that the previous period of excess demand for labour has come to an end".