Ireland’s Lean Mean Job Creating Machine is Looking a Bit Flabby

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222You’d think, listening to Ministers reeling off employment numbers and media reports of new job announcements, that Ireland was some lean, mean job creation machine. Well, in comparison with other EU-15 countries we are neither mean nor lean. Indeed, we fall well behind in key sectors.

Let’s leave aside the arguments over the 2013 employment numbers.  I suggested that they were inflated due to a statistical re-alignment between the Quarter National Household Survey and the Census (you can read those arguments here andhere).  If people want to believe that job growth in 2013 (when domestic demand fell) was higher than in 2014 (when domestic demand rose by nearly 4 percent) – well, sure, go ahead.  I prefer to take on board the CSO’s warning about interpreting job creation trends in 2013.

Robust comparisons can only start with the last quarter of 2013.  That’s when the CSO finished its statistical re-alignment.  Therefore, we have two year-on-year periods to compare.  We should be cautious interpreting this data; it would be preferable to have a longer time-series.  Therefore, any conclusions are tentative and subject to revision.

The following looks at the market, or business, economy.  This is essentially the private sector, excluding the public sector dominated sectors (public administration, education and health) and the farming sector.  Here are the year-on-year figures for 2014 to 2015 Quarter 1.

emplo_growth1

This doesn’t look so bad.  Ireland’s employment growth is above the EU-15 average and ranks 4th in the table.  However, something interesting happens when we exclude the construction sector which is non-traded and which in the past the Irish economy overly-relied on for job creation.

emplo_growth2

Ireland falls well down the job creation table when construction is excluded  – below the EU-15 average.

In the last year, the Irish market economy generated 29,700 jobs.  Of this, 19,500 jobs were in the construction sector – or 66 percent.

When we look at the previous quarter – the 4th quarter of 2014 – we find a similar pattern.

emplo_growth3While we should not read too much into two quarters, it should be a concern that market economy growth is mediocre at best and that it is construction that is pumping the numbers.

There are two noteworthy aspects of this.    First, it could be argued that construction is due a substantial rise.  Prior to the recession we saw construction employment grow well beyond the European average (in Ireland it made up 40 percent of all market economy jobs growth between 2000 and 2007).  Then it collapsed.  The rise we are witnessing is merely construction heading back to European norms.

However, construction employment is already at the European level.  Construction employment in the EU-15 makes up 5.9 percent of the labour force; in Ireland, it is already at 5.7 percent – even after years of decimation.

But beyond the construction element, there is a wider question to be asked about our economy’s ability to generate jobs.

In a previous post, it was observed that while the economy grew by over 4 percent, living standards fell further behind EU averages.  Here, we find a similar pattern.

emplo_growth4The Irish economy grew at four times the rate of the EU-15.  Yet, it could only generate the same amount of jobs in the market economy when construction is excluded.  When the first quarter data is published for this year, the comparison will be even worse.

Ireland’s lean mean job creation machine looks a bit more flabby, not so mean and content to let construction drive the market economy.

Let’s hope this doesn’t continue.

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