Former Central Bank governor Patrick Honohan always insisted the State’s economic performance was best illustrated through the metric of employment rather than the distorted lens of GDP (gross domestic product).
After 10 years of largely uninterrupted jobs growth, employment in the Republic hit an all-time high of 2.64 million between April and June of this year, an increase of 88,400 or 3.5 per cent on the same period last year. For most of those 10 years, Ireland was also the fastest growing economy in Europe.
Since the second quarter of 2023, however, changing global economic conditions, predicated on weaker demand, ongoing inflation and the impact of monetary tightening, have turned the dial. Now the European Commission is expecting the Irish economy to contract in 2023 for the first time in over a decade. At the same, there’s been a noticeable softening in the labour market.
Headline unemployment in the economy rose for a third consecutive month in October. Central Statistics Office (CSO) figures show the seasonally adjusted jobless rate for October was 4.8 per cent, up from 4.7 per cent in September, 4.5 per cent in August and 4.4 per cent in July.
An unemployment rate of 4.8 per cent is still low by historical standards – it was 16 per cent at the height of the fallout from the 2008 financial crisis. However, it is the speed of the change which economist Simon Barry this week described as “striking”. He was referring to the deceleration in the rate of employment growth, which was put at 2 per cent in September, according to separate data from the CSO, down from 2.6 per cent in August.
“The annual pace of jobs growth has now slowed in nine out the past 10 months – a slowdown that has resulted in the rate of job-creation declining to just one-third of the 6 per cent pace registered at the end of last year, and some way slower than the 3.5 per cent rate of increase prevailing just before the pandemic struck,” Barry said.
“From the perspective of the Government finances and indeed the wider economic outlook, labour market developments certainly bear close watching in the period ahead,” he said.
