The trouble with trying to work out what is going on in the economy is that all the actual indicators are looking backwards. Job figures this week showed that employment towards the end of 2025 was a healthy 2 per cent ahead of a year earlier. Useful information, but not telling us too much about the current mood.
The other difficulty is history. Ireland has been a poster child of the boom-to-bust cycle. If things aren’t roaring ahead we expect the worst. After 2008, no one is allowed to mention the idea of a “soft landing”. And then there are the uncertain times we live in and the difficulty of working out what the world will look like next week, never mind later this year. The latest uncertainty on the outlook for US tariffs inserts another unknown into the outlook for 2026.
The key area to watch in 2026 will be the jobs market. And here there are signs of change and concerns that the market is becoming a more difficult place for younger people in particular. Already disadvantaged in Ireland by expensive housing and sky-high rents, they are most exposed by the latest jobs market trends.
Two things are at work here. One is signs of a cyclical slowdown in jobs growth – firms are worried about costs for a variety of reasons, and after an extraordinary post-pandemic jump some areas of the market are cooling.
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A Grant Thornton survey this week – an indicator looking forward – showed 54 per cent of companies were confident about the outlook this year, down from 81 per cent a year ago. This was seen as a “significant deterioration in sentiment over the past year as Irish firms grapple with increasing global uncertainty and rising cost pressures.” In turn this will slow new investment and jobs growth.
Meanwhile the latest assessment from recruiter Morgan McKinley reported a 12 per cent fall in job openings in the final quarter compared with the previous three months, though this was seen as “a recalibration” rather than a retrenchment.
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A slowing in what has been a red hot jobs market would be no surprise and no harm either. Since before Covid the number of people at work in Ireland has risen by close to 500,000 to a record 2.8 million-plus. This has led to wage pressures and skills shortages, and added to pressure on housing and infrastructure.
Most forecasters expect the gradual slowdown in jobs growth – from 6.9 per cent in the post-Covid 2022 bounce to 2 per cent last year – to continue, with a rise of maybe 1 to 1.5 per cent this year, though stockbrokers Davy believe there will be another 2 per cent rise in 2026. If most of the current jobs can be protected and total employment can continue to edge upwards, that would be a good result. Much will depend, in the short term, on those unpredictable international factors.
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But, under the bonnet, the position of younger people is a concern. In a slowing market companies tend to cut hiring of younger employees. And despite reasonable resilience in consumer spending, some domestic sectors – such as retail and hospitality – which traditionally employ younger people, are not taking on as many. This is one reason why the youth unemployment rate has risen to 12 per cent, though as most people in younger age groups are in education this should be treated with some caution as an indicator.
And then, of course, there is AI. Fears that artificial intelligence would remove the first rung on the ladder for many professional jobs – doing the work previously done by juniors in accountancy practices, law firms and so on – are being borne out, at least in part, by lower recruitment in these areas, both here and internationally.
Meanwhile, the most notable negative in the latest jobs data was a 12,700 annual fall in employment in the technology sector. It is impossible to disentangle how much of this is due to AI. But what we do know is, first, AI is becoming increasingly powerful in areas such as software and data processing and analysis, and, second, that companies diverting spending into AI are under pressure to get returns and this is leading to some retrenchment elsewhere.
In Ireland, a report from the Department of Finance this week crunched the numbers against the backdrop of what it sees as evidence of a “normalisation” of the jobs market after a period of extraordinary growth. It points out that, in general, younger people are harder hit in times of uncertainty in the jobs market. Over the past year, while total job numbers have expanded, the numbers at work in the 15-to-24-year-old age group appear to be stalling.
Younger people are also in the front line of the hit from AI. The Morgan McKinley report confirms that it is seeing slowing demand for junior and generalist roles, though of course AI is also creating new demand for those who can harness its expertise. The department’s report points out that in tech and financial services, two sectors seen to be at higher risk from AI, employment to 15-to-29-year-olds has fallen over the past two years. In tech, the numbers in this age group employed fell by 20 per cent, while there was a 12 per cent rise in employment among 30-to-59-year-olds.
The immediate problem for graduates and other younger people seeking work is that two things are happening at once. Jobs growth generally is slowing and this is hitting hiring at all levels. And the rapid increase in AI capabilities looks now to be having a measurable impact and will, in time, revolutionise a lot of office work.
It is not all negative. Not by a long shot. Construction employment is growing and will be supported by the Government’s infrastructure programme, and many IDA-supported companies, notably in areas such as pharma, continue to hire. Many companies report that they are slowing hiring and at the same time are suffering from skills shortages.
Over time, as we have seen in the past, younger people adjust their educational choices to the jobs available. But in the short term a young lawyer, accountant or software developer can’t retrain to work on the MetroLink project or to an AI-related tech job. The jobs market is entering a big transition and younger people are the ones in the firing line.
