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Quarterly change in Irish employment relatively flat in Q4, likely due to renewed lockdowns
Statistical issues still remain, which means job loss somewhere between 55k and 391k
Uneven nature of job losses will be key issue in 2021
Analysis by Shawn Britton
Since the onset of the pandemic in early 2020, it is clear that the most severe impact on the Irish economy has been on the labour market. Measures of economic activity, such as real GDP and manufacturing production, remained resilient over the course of 2020 due to the outsized impact of the multinational sector. A recently published Economic Letter from the Central Bank of Ireland has also found that government supports introduced in response to the pandemic have “significantly mitigated the impact of Covid-19 on household incomes”. Consequently, the volume of retail sales (excluding motor trade) somewhat surprisingly posted an increase in 2020 despite lockdown measures surrounding retail and recreation.
In contrast, while there was a marginal quarterly increase of 4.9k (0.2% q/q) more jobs in the final quarter of 2020, this still translated to a drop of 55.0k (-2.3% y/y) in numbers at work compared to a year ago. One minor caveat is that these employment numbers are based on the internationally agreed definition which includes those “temporarily away from work” as employed; so, they include those not working but claiming the Pandemic Unemployment Payment.
To adjust for this statistical issue, the CSO also provide a Covid-adjusted measure. On this metric, numbers at work as of December 2020 stood at 1.97mn, which is down by about 16.5% from Q4 2019.
If we view the internationally agreed definition as a lower-bound and the Covid-adjusted figure as an upper-bound, then in 2020, the Irish economy lost somewhere between 55k to 391k jobs. This wide range highlights the uncertainty surrounding measuring employment. When we take into consideration that Irish employment grew on average about 3.2% each year between 2013 and 2019, it is quite striking to see that the pandemic has meant a decline in jobs of anywhere between -2.3% and -16.5% by end-2020.
Perhaps the easiest way to visualise the impact of Covid-19 on the Irish labour market (and the uncertainty around measuring it) is to look at the monthly unemployment data. The chart below compares the two current measures of unemployment: the standardised unemployment rate and the Covid-19 adjusted unemployment rate. The standardised unemployment rate edged down from its summer peak and now sits at 5.8% in January. This is somewhat counterintuitive as lockdown measures were reintroduced intermittently throughout Q4.
Conversely, the Covid-19 adjusted unemployment rate increased in the final quarter of 2020 and jumped even further in January to 25%. While this measure currently reflects temporary layoffs rather than permanent job losses, there is still a risk that unemployment remains persistent over 2021 even after the economy re-opens.
Finally, it is important to note the uneven nature that Covid-19 has had on Irish jobs. The most obvious example of this is the sectoral divide: areas such as Accommodation and Food Service and Construction remain severely impacted, while some sectors, such as Information and Communication and Industry, have seen job increases. However, there are also notable differences in jobs lost (or gained) depending on age, region, and education level. As the Irish economy normalises on the back of the easing of lockdown restrictions and the vaccine roll-out, it will be key to monitor these divergent trends to assess whether Ireland follows a “K-shape” recovery or a more broadly-based recovery in 2021.
This non-exhaustive information is based on short-term forecasts for expected developments in the economy and financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalised investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a judgment as of the date of the report and are subject to change without notice.