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Changes in employment levels by sector before, during and after the recession

Posted on November 05, 2015 by Daragh McCarthy

Enterprise Walk
NERI blog: Changes in employment levels by sector before, during and after the recession

Recent changes in employment

The latest figures from the Quarterly National Household Survey show employment increasing in almost all sectors of the economy. The stand-out figure is employment growth of 18.5 per cent in the construction sector over the twelve months ending in June 2015. A rise in employment was recorded in all but three areas of the economy over the same period, with small—less than one percent—decreases in hospitality, administrative and support services, and education.

Broad based job growth in the second quarter of the year marks eleven consecutive quarters of employment increases and this trend looks set to continue into 2016 where we forecast a year-on-year increase of two per cent (see the Quarterly Economic Observer, Autumn 2015 ).

The total number of people in employment peaked during the mid-point of 2007 with a trough occurring in the second quarter of 2012. Looking at the percentage change in employment by sector over this time period indicates industry, construction, retail, and administrative activities were hit hardest by the recession. Employment in each of these sectors has rebounded, but remains well below the level experienced in 2007. 

Percentage change in employment by sector—2007, Q2 compared with 2012, Q2 and 2015, Q2

 2007, Q2 —
2012, Q2
2012, Q2 —
2015, Q2
2007, Q2 —
2015, Q2
Agric, forestry & fishing-19.8729.163.50
Industry-23.206.09-18.53
Construction-63.6426.41-54.03
Wholesale & retail-11.131.30-9.97
Transportation & storage-3.502.09-1.49
Accomodation & food-9.8413.922.70
Information & communication14.041.3515.59
Financial services & real estate-2.743.420.59
Professional & technical-7.4812.874.42
Administrative activities-20.451.27-19.44
Public admin & defence-3.020.80-2.24
Education2.963.016.05
Human health & social work15.451.9217.67
Other2.441.493.97
Not stated----42.22
Total-14.16.77-8.30

Employment outlook by sector

The level of activity the construction sector was unsustainable in the years immediately preceding the crash in 2008,  accounting for almost 11 per cent of gross value added by 2006 and was well above the EU15 average for over a decade prior to the crash see (see Internal Devaluation and Labour Market Trends during Ireland’s Economic Crisis). Returning to the peak level of employment in this sector is unlikely and undesirable. However, higher levels of public investment in capital infrastructure, among other factors, should boost employment in this sector over the coming years.  The value of domestic demand has increased over the past twenty-four months, with the Autumn QEO projecting personal consumption will increase by 2.3 per cent 2016 compared with the current year. This should increase employment in the wholesale and retail sector, amongst other areas. The recent experience in the UK is instructive in this regard; on the back of steadily increasing employment in preceding years, wages and productivity have risen substantially in the opening six months of 2015. With inflation remaining close to zero real wage increases appear to have triggered an increased propensity to consume that is currently driving much of the growth in the economy. Similar developments in the Republic would have a very positive employment effect on the retail sector, though unemployment in Ireland remains substantially higher than the level in the UK labour market—9.4 per cent compared with 5.4 per cent. 

The number of people employed in industry (excluding construction) has was relatively stable from the late 1990s through to the recession starting in 2008. The reduction in employment levels in this sector mostly occurred relatively early in the crisis before rebounding at a reasonable pace since 2012.  Generally, Irish employment is dominated by sectors engaged in the delivery of services and the recent decline industrial jobs may represent a continued shift away from manufacturing. The greatest percentage increase in employment over the past seven years occurred in activities related to information and communication technology and human health; a pattern consistent with the notion that a shift away from industry is continuing to occur, with a greater reliance on the service sector to create jobs. As ever, technological change alters patterns of employment across a range of sectors in the economy. The pace and novelty of change being driven by developments in the IT sector is widely debated, but there are notable examples of significant shifts occurring in fast food and professional services; a restaurant in San Francisco, Eatsa , where customers order via tablet, reducing labour costs and prices, and Upwork , a platform where freelancers compete to provide accountancy, marketing and web development services. Looking at the employment changes that have occurred in the Republic since 2007, it may be the case that technological change and shifting patterns of work have reduced the level of demand for administrative services; after experiencing a 20.5 per cent decrease in employment in the five years between second quarter of 2007 and 2012, employment in this area only rebounded by 1.3 per cent in the subsequent three years.

The positive employment outlook in the Republic takes place in the context of a modest pick-up across the euro area—where the employment rate in the second quarter of this year was 64.5 per cent, up one percentage point since the recent trough experienced in the mid-point of 2013. The European Central Bank projects continued improvement in the euro area labour market over the coming months. It is vital that these forecast improvements materialise, and Ireland and Europe move away from a period of characterised by relatively low levels of employment.  

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