January 6th Evening: The Recession Diaries
Higher and higher - that’s the way unemployment is going. Strange this is not getting the attention it deserves. While the media debates the fiscal meltdown, the ‘will-they-or-won’t they’ cut public sector wages (or just freeze them ad infinitum), a blood-letting is beginning in the labour force. Maybe it’s just that we can only handle so many debacles at a time. Yet, there is nothing more guaranteed to mire down an economy than carrying high levels of unemployment. You can always pay back Government debt; much harder to create sustainable jobs.
Ireland has been blessed, sort of. During the, now long ago, Celtic Tiger days Ireland had an enviable unemployment rate. In 2001, the over-25 age group experienced a jobless rate of 3.2 percent (the 3rd best in the EU) compared to an EU average of 7.2 percent. For under 25s, our jobless rate was 7.3 percent compared to an EU average of 17.3 percent. Truly, we lived in the promised land.
Now, everything is changing. The Quarterly National Survey, using EU measurements, shows a seasonally adjusted unemployment rate of 6.3 percent in the 3rd quarter of last year (June-August). That wouldn’t appear so bad except that it refers to a period starting six months ago. The CSO’s Live Register is more current but it is always emphasised that this is not an accurate measurement of unemployment as it contains part-time workers. That being said, it is still a helpful guide as, in percentage terms, there is little to separate the measurements (the Live Registered showed 6.4 percent in August).
However, the most recent Live Register from November showed a substantial rise - increasing to 7.8 percent. No doubt, when the next quarterly survey comes out it will show a similar rise.
So how high can we expect unemployment to increase? Different commentators suggest slightly different but nonetheless depressing numbers:
- ESRI: 9.4 percent by end of this year
- Goodbody: 8.3 percent by end of this year and 8.9 percent by end of 2010
- Davy: 10.2 percent by end of this year and 11.7 percent by end of 2010
- IBEC: 10.7 percent by end of this year and 11.1 by end of 2010
They all pretty much tell the same story - we will be reaching double-digit numbers in the short-term. IBEC goes further and suggests that relatively high unemployment will be maintained until 2014 with a 9.1 percent rate.
For young people, it could get really hard. The quarterly survey shows that back in August, unemployment among under-25s had already reached 15.9 percent. On this basis, we should expect youth unemployment to exceed 20 percent by 2010 and to maintain that high level, using IBEC’s projections, until 2014. One in every five young people on the dole - what a postscript to the Celtic Tiger.
So what can be done? If the Government is anything to go by, we must continue to stuff the corporate sector with subsidies in the hope that the interplay of private market forces will give us a break: reliefs, subsidies, incentives for start-ups, new investments, R&D, venture capital, etc. And if that doesn’t work? Just add on more.
In the UK, Labour has announced a job-creation programme of 100,000: school repairs, new rail links, hospital projects, super fast broadband and climate-change initiatives such as electric cars, wind and wave. It’s not that all these jobs will be created within the public sector - but they will be led by public sector planning, in coordination with private sector interests, and will be public sector funded.
The UK Labour’s job creation target represents about 10 percent of total unemployment there. The equivalent here would be approximately 20,000. Of course, this target would create further employment in spin-off activity in addition to targeting high-end infrastructural stock (telecommunications, energy, etc.). It’s the kind of leadership we desperately need but are not getting.
Of course, I hear some of my more conservative acquaintances tut-tutting:
‘Blimey, all we have to do is get the economic conditions back to what they were and let the market do its business. It happened before, it can happen again.’
Yeah, well - it’s not quite like that. Between 2001 and 2008 nearly 250,000 jobs were created in the market sectors (that is, excluding public administration, health and education). However, among that number nearly one-in-three were jobs were in the construction sectors, while another 35 percent were in the relatively low-wage sectors of hotels, restaurants and wholesale/retail. The disproportionate number of jobs created were a product of property and consumer spending - two sectors that are now being rocked. Can we return to those conditions? Hardly and, in the case of construction, we positively don’t want to.
With unemployment expected to exceed 10 percent in the next few months while youth unemployment will exceed 20 percent, what is needed is not an intensification of failed policies but, rather, a concerted public-sector led programme of creating jobs in sectors that will build a new foundation for our economy.
And this will cost money - something the Minister for Finance is insisting we don’ have. If we don’t, let’s get used to a new culture of high unemployment - the surest way of ensuring we continue not to have money.
Discussion
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Comment by: Phil
Jan 8th 2009 at 04:01
Anyone know how these commentators ground their figures for the unemployment rate? I mean, I hate to sound cynical, but most of what I’ve read from them in the past has been, shall we say, rather optimistic.
Let’s not forget what some said about the housing market a year or so ago. Personally, then working in the new housing sector, I remember trying to actually sell these houses and seeing far less enthusiasm for purchase than many liked to believe. Those buying seemed quickly to turn from rampant, eager consumers into wandering, passive observers. The market, to put it bluntly, turned quite quickly from an orgy into a prayer group.
This seems to me to correlate with many of the conceptions of how our internal economy is functioning generally. We seem to be experiencing a general drop off in spending/demand which may not be being taken into account due to our excessively optimistic ideas of how “free-flow” economies function in both the domestic and international sphere.
And, to be honest, I can only say that perhaps through the downturn we can try to build a more egalitarian society.