Thirty thousand jobs will be lost in the construction sector over the next three years as housebuilding slows, Ulster Bank's chief economist Pat McArdle predicted yesterday.
Although employment creation in non-construction sectors will remain robust, the job cuts in the building industry will push the Republic's unemployment rate to 5 per cent next year, Mr McArdle added. However, he stressed that the fundamentals of the economy were still "very sound", and said that job losses in the construction sector would not impact on economic growth.
Figures released yesterday by the Central Statistics Office (CSO) confirmed that construction employment is falling. The number of people working in building firms employing at least five workers fell to 108,800 in May from 110,000 in January.
According to the most recent statistics published by the CSO, a total of 282,000 people are employed in the State's construction sector, with 38,000 of those being foreign nationals, mainly from EU accession states.
Job losses will not be confined to foreign workers, Mr McArdle said. However, migrant workers are more mobile than Irish nationals and therefore, if laid off, were more likely to move to other countries for work.
It is expected that many construction workers who lose their jobs as a result of a slowdown in house building are likely to be re-employed for infrastructural and commercial construction projects, he continued.
Others will find construction work in Northern Ireland, while the preparations in London in preparation for the 2012 Olympics will absorb many construction workers from Ireland. Irish building firms are already tendering for projects, Mr McArdle added.
Outside of the construction sector, between 40,000 and 50,000 new jobs expected to be created this year.
Simon Barry, senior economist at Ulster Bank, said yesterday that one more ECB interest rate hike is likely in September, bringing the rate to 4.25 per cent. However, he believes that this will mark the peak of the cycle.
Mr McArdle said he remained confident of a soft landing in the housing market. He expects that the "modest fall" in house prices seen recently will continue for the rest of the year.
When combined with the expected levelling off in interest rates and continued wage increases, this is likely to improve housing affordability, which in turn will draw first-time buyers back into the market.
This improvement in affordability will be further compounded by the anticipated increase in mortgage interest relief to €20,000 in this year's budget, Mr McArdle added.
