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Jobs Growth Rate at 3.3%, Unemployment at 4.7%
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There was a mixed report on jobs growth and unemployment from the CSO’s Quarterly Household Survey today.. The growth in jobs is around 3.3% which is very healthy in an EU state but considerably slower than at many points in the last five years. Similarly with unemployment at 4.7% it has risen over the last quarter by 0.3% but compared to the same period last year is actually about .01% lower. Fair enough that might be splitting hairs but it suggests that the picture on the economy is still unclear.
What is clear is the failure to diversify our dependence on construction is coming back to bite, the jobs growth in the sector is down from 10% last year to roughly 1.5% this year. That is a huge decline and an indicator of how far prices may have to drop in order to balance out stock that has been built. The picture is also mixed by the fact that over 55% of jobs growth is accounted for in part-time work. On the radio I heard Austin Hughes suggest that much of this was actually a choice made by workers rather than an economic dynamic and perhaps there is some truth to that.
However there are worrying trends under the surface, for example the unemployment trend over the course of the past year has been steadily climbing. The correspondence between the potentially negative signals, trends in unemployment and jobs growth and the current health of construction suggests (and comparative health of financials and wholesale/retail trade, hotels and health) we were deeply overexposed as an economy to a downturn in building. This was something that had been flagged by some people for a while but little was done to actively manage the market. Indeed it was Cowen et. al.’s position not to interfere at all.
All that being said, the indicators are far from conclusive on a recession. Things are certainly “slowing down” but how much and how far is a factor of management of the current situation and into the future. On a political front the government has had ten years in the driving seat and all bar 2001-2002 were considered “good times” it will be a clear test of ideas, ability and decision making to make sure that things slowing does not turn into the “bad old days”. If they manage it well people may even allow then their pay rises unbegrudged.
If he follows the advice given to a Chamber of Commerce meeting in Derry today then we will all be fine (the roots of the Celtic Tiger is an argument for another day though);
Innovation, the development of skills, progressive tax policies and a forward-thinking approach to business are the key ingredients needed for success in Northern Ireland over the next two decades, according to Irish premier Bertie Ahern
…Mr Ahern challenged business leaders to be forward-thinking, and said there was a need for innovation: “Remember, all the products and all the things that will be success stories in 20 years have not been dreamt of yet.”
He added: “The people of this region have overcome enormous challenges. So many people, including the Chamber of Commerce and the people in this room, are working hard to ensure the future is bright.
You say that it as if that is a bad thing? Letting the market go to its level without the government propering housing up artifically. Remember we still have a low rate of housing compared to the rest of Europe.
I meant it as a philosophy on the wider market not solely as housing, a reluctance to intervene when there was an over-reliance on construction that needed to be dealt with was a bad thing.
Letting the whole thing run its course to a point where now there is a 50/50 chance it could get better or worse is not necessarily good government. We may have a low housing volume but the fact that the best way it was thought of to remedy that was to let a market fly loose then recoil like an elastic band is no great thing.
The eternal right left debate :). Hows the weather in Sweden this year a bit nippy i guess
Well thankfully government provide us with scarves, hats and a bit of wood for the fire. Aah its lefty paradise
There’s a few things going on together, and it’s likely the media will misreport them all. It’s isn’t an Irish-only story about a simple “house crash leads to recession” - but this is what you’ll probably read in the papers and see on the TV.
There are global trends at play here. The credit crunch might cause a recession, and it is also causing house prices to plummet. In fact, the house price drop (correcting to sane prices) is actually a good symptom of the crunch; it’s important not to mix up cause and effect.
There isn’t much Cowen could have done differently. I have a pet theory that the world governments should coordinate to ban subprime debt - simply make it illegal to charge interest at more than, say, baserate+3. But that’s for another day.
The house price increases simply became a pyramid scheme. The pyramid is being totally flattened now and it is a mug’s game to try to predict exactly what price will be left after the bubble has burst.
The amount of employment in construction is a seperate issue (but clearly intertwined with speculation on the pyramid scheme). Having such a large construction sector for a while mightn’t have been so bad if it was supplying a genuine demand; but instead of matching supply to demand we saw people building bigger houses than the needed simply because they were scared of how much the big house might cost in future when their family expands. This is essentially a market failure I suppose. It (the ’system’) *should* have built properties of various sizes to suit the inhabitants, thereby making the best use of the land, and keeping rents down. (Adam Smith’s invisible hand)
So how do we define, and then restrict, speculation by idiots? And, more importantly, how do we do this without inadvertently killing “good” innovation? And even when you’ve sorted those technical issues, how do you avoid the political backlash of the vested interests (e.g. home owners near the top of the property pyramid, idiots and vultures alike)?