JOB LOSSES in the construction sector are accelerating as building activity contracts sharply, data released by the Central Statistics Office (CSO) showed yesterday, writes David Labanyiand Laura Slattery.

CSO's construction employment index, which measures the number of staff in private construction firms with five or more employees, fell 14.8 per cent to 92.6 in the year to May, the lowest reading in eight years.

This is the 14th consecutive month the index has declined. The index is based on a sample of 1,000 firms and is used to measure short-term trends. According to the data, 274,400 people were working in construction at the end of March, down from a record high of 282,000 in the first quarter of 2006.

The slowdown in the construction sector will continue to be the primary drag on the labour market, Fás senior economist Brian McCormick said in the jobs organisation's latest commentary.

Despite an imminent correction in the labour market, the number of people in employment will rise by 24,000 in 2008 before falling by 31,000 next year, according to Fás.

"A significant migratory response should soften the blow of negative employment growth on unemployment," Mr McCormick said, forecasting net emigration of 20,000 in 2009.

The unemployment rate will rise to the EU average of 7 per cent in 2009, he added. The CSO's latest estimated unemployment rate, for June, is 5.7 per cent.

Speaking on RTÉ radio yesterday, Construction Industry Federation (CIF) head Tom Parlon said the industry was about to lose "20,000 to 30,000 jobs" and that demand had dried up due to a combination of negative sentiment and liquidity problems restricting the mortgage market.

He called for incentives to kick-start the market and reduce the stock of unsold houses. "We are having discussions with the banks and Government and other players in terms of trying to bring some liquidity into the market.

"We are looking at some areas internally, for example our pension fund, which is in funds to the tune of about €20 billion. That could be made available - technically it is possible.

"Likewise, we need to incentivise the people that are sitting on the fence at the moment. We have a lot of people in that house-buying age bracket with jobs who can afford the houses," he said.