Lynsey Clemenger, economist at Ulster Bank commented:
Live Register figures put further pressure on Government finances…
The latest Live Register figures place further pressure on the already strained public finances, in the wake of Exchequer figures which showed total tax receipts down almost 20% in January. The numbers claiming unemployment benefit rose by 33,000, or 11.2%, from December, by far the largest monthly rise on record (+ 9.8% in March 1968). Last month we signalled that it was unlikely we had passed in the peak in monthly additions to the Live Register, and while this was certainly realised in January, the month may represent a spike as a result of a particularly pronounced shakeout in employment after the Christmas holidays.
The total on the Live Register now stands at 326,100, up 82% from year earlier - yet another record rise. If the average monthly rise for the year falls back somewhat from the January increase, to say 20,000 (taking account of outward migration), the number of unemployment claimants will reach just over 545,000 by the end of the year. This gives an annual average of 435,000, compared with the Government’s forecast of 340,000 at the start of January.
Construction-related job losses continue to dominate…
Males made up 22,900 or almost 70% of the total monthly increase in claimants in January - a clear indication that construction-related lay-offs are continuing at a fast pace. Females are not escaping the effects of the deteriorating jobs market either, with the number of claimants rising by 10,100, or 10.3%, the largest monthly rise on record, and up 62% on a year earlier.
As we have hi-lighted for some time now, we expect that job losses in construction and related industries will be ongoing in coming months, however, we also expect a more pronounced decrease in employment in the services sector, particularly so in Wholesale and Retail, and Financial and Business Services, as the year progresses.
Unemployment rate to hit double-digits in coming months…
The standardised unemployment rate increased further, rising from 8.3% in December to 9.2% in January, the highest rate since December 1997. This is up from a low of 3.7% in February 2001, but remains below the average unemployment rate of 16% in the eighties.
Given that we expect the weakness in the labour force will accelerate in coming months, double-digit rates of unemployment will likely come sooner than we previously thought, and we now see the rate hitting 10% in coming months. This estimate takes into account a downward revision to the Live Register estimate of unemployment when the official unemployment figures are released in the Q4 Quarterly National Household Survey, as this measure does not include part-time workers who are eligible for unemployment benefits.
Davy Chief Economist Rossa White says: Record spike in unemployment claimants highlights pace of deterioration in economy:
Claimants jump 11.3% month-on-month, double the worst seen so far
The Live Register rounds up a miserable triumvirate of first economic data points from 2009. Claimants surged 11.3%, eclipsing the previous worst months: +9.8% in March 1968 and +8.6% in January 1975.
This latest release follows news that new car sales fell by 67% and tax revenue by 19% in January compared with the same month a year ago.
It must be noted that the 33,000 increase is double the worst seen so far, i.e. the 16,400 spikes in both November and December.
Unemployment rate estimated at 9.2%, but this may exaggerate it for now
Note that the Live Register is not the official measure of unemployment, e.g. it includes part-time workers. We reckon that there has been a spike in part-time workers who can claim benefit but are not officially unemployed. The latest official labour market figures (albeit out-of-date) are due in three weeks.
The estimated unemployment rate of 9.2% is up from 5% a year ago. We reckon the rate will reach at least 13% by the end of 2010.
Note that males accounted for two-thirds of the monthly increase. This reflects the fact that construction remains the weakest sector and that the public sector has the highest share of females.
Rise in number of claimants adds to government expenditure