Last October, I painted a rather bleak picture of Ireland’s unemployment situation, with the percentage of private sector jobs lost in the economy much closer to the 1930s USA than its contemporary US counterpart. At the end, I wrote:
Given the severity of the jobs crisis, it is important that once we get in to the new year, the limelight, which been so hogged by NAMA and the Government’s finances, can move back to our jobs crisis. The €11bn in lost earnings from the 300,000 job losses is an annual cost to society that’s easily comparable to our worst nightmares about public finances or the banking system. And that’s not even factoring in the human costs of unemployment.
We are now in that new year. NAMA is going ahead – we can only hope it does so in strict accordance with its principles, thereby minimising the taxpayers’ exposure. The Government finances, by general consensus, have at least turned the corner, although as noted at the time, it can hardly be called the toughest Budget private sector workers are going to face over the next few years. The property market continues to adjust, improving Ireland’s competitiveness but also pushing more households into negative equity. It should be remembered that falling property prices are only a real problem for those with mortgage debt (about one third of households), and even then, it is only those in negative equity (about one in four mortgage holders) that we should really worry about.
In particular, there are potentially significant costs to society when there are large numbers finding it difficult to pay back their mortgage – latest figures suggest that this is about 3% of mortgage holders. And the principal reason people find it difficult to pay back their mortgage is unemployment. Indeed, of all the major problems facing the Irish economy – its banking system, its government finances, its property market and its labour market – it is the latter, the problem of unemployment that so plagued Ireland during the 1980s, that looks most intractable.
Last week, the CSO published final figures for the Live Register in 2009 across a range of headings, including age, gender and live register scheme. (Today, incidentally, it will be publishing more detail, including signers-on by area.) The graph below shows the ratio of those in receipt of Jobseekers Benefit (a proxy for those recently employed but now unemployed) to those in receipt of Jobseekers Allowance (a proxy for those in long-term unemployment of more than 12 months). Even at the height of our employment boom, there were close to 100,000 people in receipt of Allowance, the vast majority of these being termed the ‘unemployable’. At the same time, there were typically about two-thirds of that amount (60,000-70,000) in transitional unemployment, i.e. in receipt of Benefit while presumably “between jobs”.
Since the start of 2008, the number in receipt of Benefit, i.e. the fresh-off-the-boat unemployed, soared, reaching almost 200,000 in early 2009. At that point, there were more in receipt of Benefit than there were in receipt of Allowance. Since then, the number in receipt of Benefit has fallen by almost one-sixth. At the same time, the number in receipt of Allowance has grown a further 10%. The net result is that the ratio of new unemployed to old unemployed has fallen rapidly back to its pre-bust level – although the actual numbers for both are much higher.
If this trend continues over the course of 2010, the priority for government will not be to stem the tide of job losses, a Knut-ian task from 2009 at any rate. The priority will be to tackle the scourge of long-term unemployment, with far greater numbers (250,000+) facing that prospect than freshly out of work (perhaps 100,000 this year).
The second graph below divides up the top-line numbers across three dimensions: blue is male, red is female, light is under-25, dark over-25, dashed line is those on Benefit (i.e. new unemployed), solid line is those on Allowance. All are set to 100 for 2006 Q1, and you can see that very little has happened by late 2007. By early 2009, though, it is clear that men newly unemployed are the biggest casualty of the recession. Over the course of 2009, they have started to turn from dashed line into solid line.
Of all the groups, it is men under-25 who are faring worst. The number of women under 25 in receipt of Benefit fell 28% in the final quarter of the year, and it’s not a case of all moving over to Allowance, as the numbers on Allowance also fell, by about 7%. In contrast, the number of men under 25 in receipt of Allowance has trebled from pre-bust levels and shows no signs of falling yet.
So the good news is that fresh job losses have eased back significantly. The bad news is that long-term unemployment is becoming more entrenched, particularly in our young men. The government should now respond to the jobs crisis with the singularity of purpose it found for our banking system last year.
However, it’s one thing finding out what your priorities should be. It’s a much different – and more difficult – exercise to tackle the problem of long-term unemployment. It’s my hope that this will be a topic of focus on the blog this year. For a preview of my thoughts, here’s the summary of a one-line-on-each sector-by-sector analysis I did over on the Central Bank forum on thepropertpin:
Where might our growth come from, aside from a gradual pick-up in some domestic activity? I would pick (1) ICT, (2) finance & insurance and (3) professional & technical activities, with some potential from perhaps one of electricity, tourism, education and the arts.