The outlook for the jobs market has darkened, with the Government now expecting the unemployment rate to stay above 13 per cent at least until 2015.
In its medium-term fiscal statement, released yesterday, the Government predicts an unemployment rate of 14.5 per cent for next year, marking no notable improvement on 2012. It had earlier forecast a rate of 13.6 per cent for 2013, with this to decline to 11.7 per cent by the middle of the decade.
The department said while a modest rise in employment was likely over the next two years, the impact on unemployment figures would be limited.
It expressed concern that the composition of unemployment had changed considerably since 2006. In the first quarter of 2006 long-term unemployment was 29 per cent of the total but that figure had risen to 61 per cent by the second quarter of this year, with many of those who lost their jobs in 2008 and 2009 still on the live register. “This level of persistence suggests that unemployment is becoming increasingly structural in nature,” said the statement.
Lack of hope
Fianna Fáil finance spokesman Michael McGrath said the most depressing aspect of the statement was its lack of hope on jobs. “The Government appears to have given up all hope of making any progress on the jobs front.”
The revision came as the Government reduced its GDP growth forecasts for the coming three years, but said this should not lead to greater austerity than the €8.6 billion that had previously been expected. This was due to a number of factors, including a small projected fiscal surplus for this year and a surplus within local authorities.
This stance sees the Government “on balance” choosing not to act on the advice of the Fiscal Advisory Council, the State’s budgetary watchdog, which has recommended austerity measures worth €11.4 billion up to 2015.
The €3.5 billion to be extracted from the economy in 2013 will come from €2.25 billion in spending cuts and €1.25 billion in revenue-raising measures.
Social welfare cuts
The Government said “all options” were being considered for the budget, adding that this included social welfare cuts and reductions in the public sector pay bill.
It said “universal benefits” such as child benefit were also being examined, and flagged a broadening of the tax base through the abolition of tax reliefs and a broadening of PRSI. Motor tax will also be targeted, although full details of the planned measures will not be revealed until budget day on December 5th.
The Department of Finance has slightly upgraded its GDP growth forecast for this year from 0.7 per cent to 0.9 per cent, but has cut its projection for 2013 by 0.75 percentage points to 1.5 per cent. It has also lowered its forecasts for 2014 and 2015. The Government now anticipates it will take longer to return to “robust” growth, citing an uncertain international outlook and weak domestic demand.
