Numbers at work almost 6% higher than previously indicated

Upgrade reflects incorporation of census data and new survey approach

Jobs growth slower than expected in Q3 but may reflect switch to full-time work as recovery becomes more ‘mature’

Unemployment revised marginally higher reflecting increased numbers among younger age groups

Historic picture of strong recovery after sharp fall in employment remains intact

International comparisons suggest scope for sustained job gains

New and revised data show numbers at work in the Irish economy now stand at 2,190,900 about 120k or 5.7% higher than previously estimated.

• This revision primarily reflects the impact of adjusting jobs data to take account of Census 2016 results that show a larger working age population. This accounts for about two-thirds of the revision. Separately, a changein the way the jobs survey is undertaken has also boosted estimated employment. As diagram 1 below indicates, revisions to jobs data do not dramatically alter the employment path taken by the Irish economy in recent years.

• Today’s data also show the pace of jobs growth has eased significantly in recent quarters

• Numbers at work were 2.2% or 48k higher in Q3 2017 than a year earlier. For the year to date, the increase is 2.8%. For 2016, the increase was 3.7%. The quarterly change in Q3 was 0.5% (or 1.9% at an annualised rate) further confirming the more modest rate of gains of late.
• The pace of Irish jobs growth remains notably stronger than the latest figures for the Euro area (+1.7%), the US (+1.2%) or the UK (+1%) but the recent slowdown is worthy of investigation.

• The slowdown in Irish jobs growth of late likely reflects several influences

• There is a marked shift to full-time employment which is up 114k or 6.9% while part-time employment is down 13.1% or 48k. This may be indicative of the recovery moving to a more ‘mature’ phase as well as a sustained improvement in domestic spending of late. These factors are encouraging fuller utilisation of existing employees through a transition to full time employment. This may be an influence in the somewhat slower pace of employment growth of late in areas such as construction. A trend switch to full-time employment has become more pronounced through the past year but it may take several data points of the new survey to determine exactly how important and enduring this factor is.
• In some areas, such as industry, slower employment growth may reflect increased competitive pressures related to Sterling weakness as well as a more cautious attitude to hiring because of Brexit or other sources of market uncertainty.
• The slower jobs growth of late is at odds with stronger GDP growth of late and relatively solid readings from most other Irish indicators. As such, we don’t see it heralding any step-down in broader economic conditions.
• While slower hiring could reflect skill shortages in some specific areas, other evidence suggests this is not broadly based. Today’s data show the pace of jobs growth varies widely across economic sectors suggesting no ‘macro’ capacity constraints while the small upward revision to the unemployment rate also implies slightly greater capacity in the labour market.  In addition today’s data show employment growth among Irish nationals increased by 1.7% whereas the number of non-Irish nationals at work increased 5.3%, highlighting ready access to a significant pool of overseas labour. Separate to today’s data, Ireland’s job vacancy rate at 1.1% is about half the EU average and has shown little evidence of building pressure. In the same vein, earnings data show significant sectoral variations but no concerning trend overall.

• The unemployment rate has been revised up modestly but this shouldn’t be regarded as pointing to materially weaker conditions.

• For Q3 2017 the revision takes unemployment to 6.7% from 6.4%. Historic revisions are slightly larger with the peak change being a rise of 0.8 percentage points to several quarters around the trough of the economic cycle in 2011/12.
• In circumstances where the Irish economy and jobs market are going through a strong period, it may seem surprising that unemployment is being revised up even if relatively modestly. This may be explained by the fact that revisions relate disproportionately to younger age groups (The Census revealed a larger number of younger people in the country and the changed survey methodology reduces the non-response rate which was typically larger for younger age groups).
• These revisions suggest the potential growth capacity of the Irish economy may be marginally greater than previously thought.  In a broader context, to avoid the risk of hysteris and possibly permanent exclusion from employment  for some in these younger age groups, today’s data also argue for more targeted initiatives in this area.  

• The broad picture remains one of a strong recovery in jobs after a collapse in employment during the crisis.

• Today’s data show employment fell by 363k between the pre-crisis peak of 2.237mn of Q42007 and the crisis trough of 1.876mio recorded in Q3 2012 ( a somewhat larger drop than the 327k previously reported). Since then, numbers at work have risen to 2.192mn in Q3 2017. As noted above, this is about 120k higher than previously indicated.
• Today’s data show numbers at work in Ireland are some 2% below the Q4 2007 peak. This represents a remarkable recovery. However, as diagram 2 indicates, numbers at work in the Euro area and US are both around are both some 5% higher than ten years ago whereas UK employment is some 8% higher. This implies that if Ireland had followed a less volatile economic path, number at work here could be between 150k and 220k higher.
• Even, if we allow for the possibility that the construction boom had moved Ireland beyond any proper measure of full employment in 2007 and look at the path of Irish employment excluding building jobs, an alternative path mirroring that of our economic neighbours would have left Irish employment some 60-100k higher now than is actually the case. This comparison both emphasises the importance of a stable economic course and, together with the slightly higher unemployment rate in today’s data, also hints at scope for relatively strong growth in activity and employment to persist in coming years.
•  
• 
  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.