A quick review of employment and wages in 2015
Posted on December 22, 2015 by Daragh McCarthy
There seems to be an increasingly strong contention that 2015 was officially the year the good times returned. A quick overview of employment and average wage growth would suggests a definite improvement in the labour market over the past 12 months, and the outlook for 2016 is broadly positive, but it’s not quite the good times of old.
Economic recovery began in the mid-point of 2012. Despite sustained improvements in 2013 and 2014, a double-digit unemployment rate, high levels of underemployment, and broadly stagnant average weekly earnings jarred with the idea the economy was booming. In this sense, there is evidence that 2015 saw growth in output translate into a recovery in living standards for many households. Accounting for inflation, average weekly wages were up by 2.2 percent over the twelve months to the end of September this year. The number of people in employment rose by 2.9 percent during this time. Employment in construction reached a nadir in the opening months of 2013 when just over 96,000 people worked in the sector. The first nine months of 2015 has seen the number of people employed in the area rise by 10,700 with 127,400 people now working in the sector. This has been one of the primary drivers of recent employment growth. However, comparing the current breakdown of employment by sector to the distribution of jobs in the months preceding the economic crash in 2008 shows information and communications, health and social care, and education have experienced the strongest growth in employment over the last eight years. The unemployment rate is 8.9 percent, down 1.1 percentage points since the start of the year, but unemployment remains above 10 percent in the Midlands, the South-East and the West of the country. Across the state, the proportion of the population in the labour force is 4.2 percentage points below the peak level reached in the third quarter of 2007. A change in the population’s age profile—with a greater number of children and retired people, compared to those of working age—plays role in this decline, but it seems likely that a considerable number of working age people that left the labour force over the recession have yet to return. However, overall, the figures suggest that 2015 improved the outlook for those in work and those looking for work.
Looking beyond the basic labour market indicators, we can see any recovery in living standards was far from universal. It is doubtful that many people renting in the private market, lone parents or the 191,700 people that are still unemployed will remember 2015 fondly. By the third quarter of 2015, average monthly rents, as measured by Daft, rose 9.3 percent year-on-year. In July 30,200 lone parents transitioned off the One Parent Family Payment this year with approximately 1 in 3 of these households suffering an income loss due to the changes, though Budget 2016 did introduce measures to offset this loss. At present, there is 1 job for every 15 people looking for work. Levels of per capita spending on public services remain well below the levels set before the crisis and are projected to decrease further over the coming years. This will result in continued pressure on public sector workers and diminish the quality of life for those in society that rely heavily on these services.
If 2015 brought a partial recovery for some, while others lagged, what can we expect from 2016? There is a consensus amongst forecasters that Ireland will be one of the fastest growing economies in the EU in 2016 and again in 2017. Such strong growth reflects pent up demand, improving confidence and increased levels of employment across the economy. The latest NERI publication on the economy—the “Quarterly Economic Observer, Winter 2015”—forecasts economic growth will be 4.1 percent in 2016. Pay restoration in the public sector and a continued tightening in the wider labour market should see a rise in average wages again in 2016. We forecast a rise in hourly earnings of 1.7 percent over the coming twelve months, with employment growth of 2 percent over the same period. Strong GDP growth in Ireland is occurring in the context of a subdued economic performance in Euro area. The European Central Bank’s efforts to spur recovery in the bloc through looser monetary policy should boost growth prospects in the domestic economy and help mortgage holders through more accommodative interest rates. The our forecasts for 2016 are many and varied; Europe is facing multiple crises, with the threat of Britain leaving the EU featuring prominently, and a continued slowdown in the Chinese economy could dampen world trade and reduce corporate profits, particularly for multinational companies. Meanwhile, inadequate levels of public investment in transport and housing, among other areas, is likely to reduce the potential for strong economic growth to be sustained over the coming years, while having a detrimental impact on the quality of life many families can expect.
On balance, 2015 brought relief for many households—not quite “good times”, but a more positive outlook. The coming year should see the recovery strengthen, though repairing the damage done through the years of austerity will take time, good policy-making at a national level and an international environment that remains broadly favourable.