Ireland’s record low unemployment rate of 3.8 per cent, announced in May and June, and heralded as a milestone as it eclipsed the record low achieved during the Celtic Tiger era, as well as attesting to the current strength of the labour market, has now been voided. In statistical terms, it’s been “revised up”.
The Central Statistics Office’s latest jobless numbers puts the headline rate at 4.1 per cent in July, down from the revised 4.2 per cent in June. This equates to 111,900 people. The agency publishes provisional unemployment data on a monthly basis derived from the most recent labout force survey and the latest Live Register trends. However, it stresses that these are merely forecasts and therefore subject to revision from updated labour force survey data.
Either way, the headline rate of 4.1 per cent is still the lowest since June 2001. The low of 3.9 per cent achieved in October 2000 remains the all-time low.
However, comparisons with that era are somewhat bogus as the labour market was considerably smaller back then and sectorally less diverse. Economists believe rates of 4 per cent and below are tantamount to full employment here.
The Irish economy has grown rapidly in recent years, how long can it continue?
The low jobless rate poses a different type of challenge, however. It effectively represents a capacity constraint at the heart of the economy. The clamour for more capital spending on infrastructural projects, including housing, is one thing; getting the additional workers to do the work is another.
And, faced with a shrinking pool of labour, employers may need to pay additional wages to attract staff as employees are in a better position to bargain for higher wages. This is keeping upward pressure on prices. Tight labour markets across Europe are said to be the chief driver of services inflation, now the main concern of European Central Bank (ECB) policymakers.
While headline inflation rates are coming down, core inflation – which strips out energy and food prices – remains elevated largely because workers are demanding better compensation, a second-round effect of the initial surge in energy prices. That’s why the ECB is keeping an open mind on further rate hikes despite the fall-off in headline inflation.
