I have always argued that the real success or failure of a government should be heavily judged by the number of people at work in the economy. Based on this criterion, the Irish Government is doing a pretty decent job. When employment expands and job opportunities improve, many problems begin to diminish at both a social and economic level.
Granted, it is not the role of government to create jobs, but rather to create an environment where employers are willing to employ more people. It would appear that such an environment very much exists in Ireland at the moment, notwithstanding ongoing difficulties with the flow of credit in the economy and intense uncertainty in relation to Brexit. The bottom line is that Irish business is creating employment at a pretty decent pace.
The latest Quarterly National Household Survey (QNHS) employment data from the CSO relate to the final quarter of 2016. The report makes for good reading. Employment expanded by 65,100 or 3.3% in the year to Q4 2016 to reach 2.048 million. This represent an increase of 199,200 since the final quarter of 2012, which was virtually the low point in the labour market cycle. Employment in the final quarter of 2016 was still 108,000 lower than the final quarter of 2007, but solid progress is being made. In the year to the end of 2016, the increase of 65,100 comprised of an increase of 71,900 in full-time employment and a decline of 6,800 in part-time employment. When the initial labour market recovery commenced, much of the employment being created was part-time because employers remained unsure about the durability of the economic recovery. Over time this has changed and the fact that all of the increase is due to full-time employment does say something very positive about the nature and durability of the economic recovery.
The really positive aspect of the latest employment report is that on a sectoral basis, there are a lot of positive developments. The CSO breaks down the labour market into 14 sectors, and for the first time in a long while, all 14 sectors recorded positive growth in the year to the end of 2016:
- The Construction sector leads the way with an increase of 11,600 jobs;
- next is Industry with 10,700 extra jobs;
- Professional, Scientific & Technical Activities created 6,800 extra jobs;
- the Accommodation & Food Services sector created 4,900 extra jobs; the ICT sector created an extra 4,500 jobs;
- and the Wholesale and Retail Trade created an extra 3,800 jobs.
The strong growth in the construction sector comes as no surprise, given the obvious strong recovery in all elements of construction activity. However, the broad sectoral spread is indicative of a broadly-based economic recovery. Anecdotally, this is pretty obvious in any event.
The good news is that there is no obvious reason to expect this labour market recovery to run out of steam for the next year at least. While Brexit remains a dark cloud, the real effects will not be obvious until the Article 50 negotiations end. At that stage, we will have a clearer idea of what the nature of the trading relationship between Ireland and the UK will look like. Meanwhile, we are continuing to see a steady improvement in international economic conditions. The US and UK did well in 2016 and continue to do so, but the ongoing gradual improvement in Euro Zone conditions is to be particularly welcomed.
Today, the Composite Purchasing Managers Index (PMI), which encompasses manufacturing and service sector activity, jumped to a 70-month high. France and Germany were particularly strong. It suggests that Euro Zone GDP growth will be quite strong in the first quarter.
From an Irish labour market perspective, there is every possibility that employment will re-attain 2007 highs over the next couple of years. When this employment growth is combined with a steady improvement in earnings, the financially-pressurised personal sector is likely to become considerably less pressurised over the next couple of years. This points to a better business environment for consumer-facing businesses.