The Irish jobs market is in a strange place. Economic growth is slowing due to the energy crisis, but labour shortages remain in many sectors. There are signs of a jobs slowdown in some areas – notably tech – though it is not clear how serious it will be.
How do we explain the fact that many sectors are screaming for workers in the middle of a cost-of-living crisis? There is new evidence to explain why some sectors are so short of employees, though how much the slowdown will change this remains to be seen.
Where we are
The jobs market remains strong, with the latest Ibec quarterly outlook showing that the unemployment rate of 4.3 per cent is at a level not seen since the Celtic Tiger era and that the rate for 25- to 75-year-olds is just 2.9 per cent.
The Ibec analysis is that employment growth is now slowing, with Revenue figures showing that the number of employees on the payrolls of Irish business is down 2 per cent since May, with particular declines in hospitality, entertainment and education services and employment seeming to top out in some previously fast growth high-tech sectors. “This suggests both a slowdown in new hiring and ongoing difficulty in difficulty in sourcing skills to fill roles in a difficult labour market,” according to Ibec chief economist Gerard Brady. On balance Ibec still expects employment to rise over the next year.
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The latest unemployment figures show an unchanged monthly rate of 4.4 per cent and a small 2,000 monthly rise in the seasonally-adjusted number of people out of work.
The latest data from jobs website Indeed tells a similar story. Overall figures up to mid-October show job postings remaining “resilient”, according to Indeed’s economist Jack Kennedy. Job postings overall remain 59 per cent above pre-pandemic levels, roughly where they have been since late 2021, despite the seemingly endless stream of poor international economic news.
However, the trends vary from sector to sector. Pharma remains strong, as do more modestly-paid jobs in areas such as home-help, personal care and cleaning. Software development hiring has slowed. Real estate and legal jobs have shown relatively weak bounce-backs from Covid.
The Indeed figures show a “notable slowdown” in tech hiring, reflecting global trends which have seen sharp share prices falls and questions over future employment in some big players. For example, Intel is undertaking an international restructuring which could affect its Leixlip plant. Having been as much as 70 per cent above pre-pandemic levels, job postings in software development are now just 16 per cent ahead, while jobs in IT operations, help desk, information and documentation categories have similarly lost momentum.
Dublin is underperforming the rest of the country because of the tech slowdown and the fallout of a slow return to the office on local services like restaurants and retail.
Dublin is also suffering because accommodation is so expensive. The latest employment monitor from recruiter Morgan McKinley says companies based in the capital are struggling to find employees because of the lack of affordable housing or rental properties. Trayc Keevans, Global FDI director with the recruiter says there has been a decline in the availability of emerging talent, with employers struggling to fill entry level and graduate positions as many in this group are emigrating due to the housing crisis.
Labour shortages coexist – for now – with signs that hiring is slowing in some sectors, with Keevans noting some hiring freezes and redundancies in the tech sector alongside strong demand in some job categories.
How we got here
The extraordinary bounce back of the Irish jobs market has been well chronicled, with employment hitting a record of over 2.55 million and pressure on wages in many sectors. But why the big labour shortages?
One of the key reasons is that people have simply got better jobs, or ones they prefer. New evidence from the Central Statistics Office (CSO) this week shows the extent to which people have changed jobs and often changed sectors, putting flesh on the bones of anecdotal evidence that, for example, people left jobs in hospitality for retail, or were hired from many sectors – for example law, accounting, finance and traditional manufacturing – into the higher paid multinational sectors of tech and pharma. People moved up the jobs chain where they could and Covid spurred this one, in particular because many low-paid sectors were closed for a time while many better-paid ones needed staff. The data shows that the industry and ICT sectors hired heavily through the pandemic. ICT also showed a high level of movement within and between companies.
The extent of movement in some sectors is very significant. The CSO figures show that for those receiving PUP, just three out of ten in the accommodation and food sector in the first quarter of 2020 were in the same job in the second quarter of 2022. Just over 30 per cent moved to another sector entirely while 15 per moved to another job in the same sector. The destination of 16 per cent was not known – some may have been foreign nationals who returned home, or people who left the labour force entirely.
The point is that Covid-19 caused a huge upheaval in the workforce. Combine that with strong growth and you have labour shortages across the board – a huge squeeze across lower paid jobs, explaining shortages in areas like accommodation and home caring, for example.
While the accommodation and food sector is exceptional, there was also wider movement. Only four out of ten people in receipts of PUP were in the same job in the second quarter of 2022 as the first quarter of 2020 and 28 per cent of the total moved sector.
People who claimed the other main support – the wage subsidy – were more likely to be in the same job. Subsidies were used in businesses who remained open and so more than seven out of ten in big sectors like industry and transport were in the same job after the pandemic as they were before. Across the economy, 62 per cent remained in the same job – but a still significant 17.5 per cent changed sector.
For jobs that were not in receipt of any Government supports, 68 per cent remained in the same job after the pandemic, 7 per cent moved within the sector to new employment and 12 per cent changed sector. Another 12 per cent fell into the “other” category – many presumably withdrawing from the jobs market. This is still a significant level of upheaval.
The data shows people moving both ways between accommodation and food on one side and the wholesale and retail trade on the other. These were the two sectors people were most likely to leave. Not surprisingly young people were the most mobile. Less than one quarter of PUP recipients aged 20 to 24 were in the same job before and after the lockdowns.
What happens next
While the focus during the pandemic was understandably on the lockdowns, the jobs market was changing dynamically through Covid – and people were generally “trading up” jobs. This is the answer to where the employees have gone too. Some may have retired or moved abroad, but many just got better jobs.
An analysis in the Tax Strategy Group papers drawn up before the budget by senior civil servants estimated on the basis of Revenue figures that there were 1.5 million new jobs created between 2019 and 2021 and roughly the same number lost, including part and full-time employment. However, the average income tax paid for a new job was €500 more per year than for the average one lost. People were, on average, moving to higher paid jobs. And obviously in 2022 actual total job numbers rose strongly. So the jobs market heads into the slowdown in strong shape. We now wait to see what the consequences of this slowdown will be.
