11 August 2017
The Irish economy is in a strong position with forecasts showing the pace of employment growth above 3% this year for the first time since 2007. Economic experts are claiming many of our economic grievances are in the past, with Ireland returning to its previous economic peak.
With employment levels outside the construction industry now at record levels, the Central Bank forecasts that the jobless rate will fall to 5.6% by the end of 2018, compared to 6.1% projected in its last bulletin in January. The rate stood at 6.4% in March, down from a crisis-time peak of 15.1%in 2012.
Even though the economy is growing why are earnings remaining stagnant?
The labour market and wider economy continues to improve with employment levels increasing annually however, back in 2009 the average weekly earnings stood at €732.72, and were largely on a downward trajectory, touching as low as € 677 in 2014 before starting to recover once more. However, some eight years on, average weekly earnings have only just reached that 2009 level again. So, while unemployment continues to fall, the question remains as to why earnings have not started to rise at substantial rates?
Have returning emigrants helped boost the economy?
When the Celtic Tiger period ended, migration trends turned drastically. As we moved into 2010 emigration started to overtake immigration. Almost 480,000 people left the country between 2009 and 2014, of whom 228,000 were Irish nationals. That is an outward flow of an average of 3,000 Irish people a month over a six-year period.
Will the tide now turn again, as the economy returns to growth? Things are different now from in the early 1990s, with a clear skill gaps in areas such as IT and engineering, which will attract those with appropriate skills.
Ireland could now benefit from a reversal of migration tends. As the job market recovers, immigration is needed to fill key skill gaps otherwise employers in sectors such as software will base activity abroad. People returning to work here also pay tax, spend and contribute to the wider economy. They are likely to be younger than the average population another economic benefit as our overall population ages and more people move into retirement.
The Brexit challenge
A few days after Goodbody Stockbrokers asserted that the recession was finally over, Ibec is following with a strong growth forecast for the economy for 2017, although it also warns that Brexit remains a risk. It is hard to consider risks going forward and not consider potentially the greatest one the risk of a disorderly Brexit in 2019. Failure to agree a trade deal will do significant damage to trade between Ireland and the UK, with the highest tariffs likely to be applied to goods that Ireland depends most on the UK as a source of demand, namely the agrifood sector.
With jobs growing at the fastest pace since 1999, Goodbody Stockbrokers are forecasting full employment by the end of 2018. These new figures suggest that Ireland may have to rely further on immigrant labour to maintain its momentum as one of Europe’s fastest-growing economies.