In this week's blog, NERI Co-director Paul Mac Flynn looks at the impact of Coronavirus in Northern Ireland.
As the lockdown of Northern Ireland enters into its third week, the impact of these measures on our economy is, as of now, largely unknown. This may seem bizarre under the current circumstances, but the truth is that the speed at which our economy has shut down over these last two weeks is unlike anything we have ever seen before. Looking back at previous recessions is unlikely to give us any real indications or insights into our current plight. To borrow a rather hackneyed phrase, we are very much in unchartered waters.
From an economist’s point of view, the data we use to monitor the health of the economy is simply not equipped to gauge the impact of an economic event of this speed, scale and scope. Output statistics like GDP are generally measured in calendar quarters, and so we are only likely to see a small portion of the impact when the figures for the first quarter of this year are released. There are single month statistics and this may give us some indication of the impact, but these are very much initial estimates and are usually subject to significant revisions. Even with that, the estimate for March GDP is not due to be released until the middle of May.
Similarly, with labour market data, all figures related to employment and unemployment are released as three month averages. The first indication of the March labour market figures will be in the January to March quarterly figures, which will not be released until May. May will also see the publication of the Claimant Count for March which would normally give a pretty good indication of the numbers claiming unemployment benefit in that month. However, we don’t know as of yet how these figures will be impacted by the changes made to the entitlement criteria for Universal Credit brought in as a response to the Coronavirus. The closest we have to an indication of the scale of the impact so far is the announcement from the Department for Work and Pensions that there had been over 950,000 UK-wide applications to Universal Credit in the second half of March.
It will also be interesting to see if, over the coming weeks, there will be any indication of the numbers of workers in receipt of the Coronavirus Job Retention Scheme. The Central Statistics Office in the Republic of Ireland was able to give figures on this in its most recent labour market update. Unfortunately, given that the payments to employers under this scheme are not due to start until the end of the month, it is unlikely that similar data would be available here. So far, Invest Northern Ireland have announced that firms employing over 17,000 workers here have applied to the scheme. These figures only relate to Invest NI’s clients and the true number is likely to be much higher.
Given the scale of what has happened to the economy over just a few short weeks, we are eager for any data that will give some indication of the economic impact. The numbers, when they do come in are likely to be alarming. Hopefully, by that time, we will have a clearer picture of the scale of this pandemic and when we can start to return our economy full capacity. However, while a lot of the lost economic activity and employment can be regained, there is likely to be a significant, long lasting impact on our economy and labour market that we will have to grapple with for some time.
Many firms will simply not have been able to survive the shutdown even with all the government assistance that is in place. These companies may have been able to put their workers on the furlough scheme, but many will simply have made their workers redundant. These people will need significant help well beyond the acute phase of this pandemic.
The measures that the government have put in place to date will have gone someway to stabilising incomes during the shutdown. We need to make sure that this effort is matched in helping those who will be left behind when our economy returns to normal.