Dankske Bank Research, a unit of Dankske Bank, parent of National Irish Bank, said in a note this morning that, the vast majority of employment in a modern economy relates to domestic consumption, not exports. As such, the return to Irish employment growth will depend on a resumption of domestic demand, which continued to contract in Q1, being led in particular by Building and Construction (down 16%) and public administration (down 2%).

As a result, the labour market remains weak, although there are signs of stabilisation. The rate of fall in non-agricultural employment was the smallest since Q1 08. Retail employment has steadied and is likely to pick up in line with the increased volume of shop spending. Manufacturing continues to leak jobs, although this is easing as exports return to growth. While it is forecast that public service numbers will be reduced, this will be done very gradually over the next few years through the non-replacement of staff.

According to the author of the report, National Irish Bank’s Chief Economist Dr. Ronnie O’Toole, non-national workers have borne the brunt of the recession: "Employment of non-national workers has fallen by a massive 30% over the space of two years, compared with a fall of 9% for Irish workers. This is not, as is commonly believed, because non-nationals were concentrated in industries which have contracted the most, such as construction. Rather, in every economic sector the loss of jobs by non-nationals has been much more severe than for the Irish. For example, the employment of Irish nationals in the hospitality sector has actually risen 5% over the past two years, while that of non-nationals has fallen by 23%."

There are a number of possible reasons why employment of Irish nationals may have held up better than non-nationals. This might reflect differences in skill levels, employment contracts or union membership. Another possibility is that family-owned enterprises, which account for 40% of all local services jobs, are ‘soaking up’ unemployed Irish family members. "There is also a ‘pull’ element with the strong Polish economy attracting expatriates home. Polish GDP is expected to grow by 3% this year and wage growth has picked up in recent months," he said.

Net emigration has resumed, although this is entirely composed of non-national workers. Net migration was around 46,000 people of working age over the past year, with net exits of non-national workers of 60,000. In contrast, the number of Irish workers continued to grow, due mainly to the natural increase of around 30,000 because of Ireland’s young population. There is no evidence yet of net emigration among Irish nationals.

According to O’Toole, net emigration will remain high, though should be seen alongside Ireland’s strong demographic profile: "Net emigration could remain high at 30,000 per annum over the next two years, though this is lower than the current level. One-third of the increase in the number of non-national workers during the boom has already been reversed, reducing the pool of likely future migrants. The natural increase in the population is currently around 45,000, so the population could start growing again next year."

President Barack Obama and Vice President Joe Biden meet with BP executives in the Roosevelt Room of the White House, June 16, 2010, to discuss the BP oil spill in the Gulf of Mexico. Pictured, from left, are BP CEO Tony Hayward, BP Chairman Carl-Henric Svanberg, BP General Counsel Rupert Bondy, BP Managing Director Robert Dudley, Senior Advisor Valerie Jarrett, Labor Secretary Hilda Solis, Attorney General Eric Holder, and Homeland Security Secretary Janet Napolitano.

BP/Hayward: BP plc said on Monday that "no final decision" has been made about possible management changes, following reports over the weekend that chief executive Tony Hayward is leave the firm following the Gulf of Mexico oil disaster. 

BP said its board would meet on Monday evening, a day before the company announces results for the second quarter. "BP notes the press speculation over the weekend regarding potential changes to management and the charge for the costs of the Gulf of Mexico oil spill. BP confirms that no final decision has been made on these matters," the oil company said in a statement to the London Stock Exchange.

Hayward joined BP in 1982 as a geologist, and currently makes £1.045m a year as the company's head, according to their annual report. In 2009, he received a performance bonus of more than £2m plus other remuneration, bringing his total pay package to over £4m.

Bloomberg reports today that BP plans to name Robert Dudley to succeed Tony Hayward as CEO as the board looks to recover the company’s position in the U.S., two people with knowledge of the matter said.

Dudley, the director of BP’s oil spill response unit, is ready to be announced as the company’s first American chief and to take the helm Oct. 1st, one of the people said, asking not to be identified because a final decision hasn’t yet been made. The decision was reached in discussions with board members about how best to take BP forward and rebuild its US position, the person said.

“The fact he is American should help to keep things a little more straightforward in his dealings with the U.S. administration,” said Ted Harper, who helps manage $6.8 billion at Frost Investment Advisors in Houston. He doesn’t hold BP stock. “Dudley’s most important task will continue to be making sure that the well is capped.”

The stress tests were a "decently positive" step, says Simon Warner, head of Macro Markets at AMP Capital, as he believes investors now have more information to make a better assessment on European banks. He shares his thoughts with Marco Bardelli, MD of BDG Singapore, CNBC's Martin Soong & Karen Tso:

US earnings reports strong for Q2, but outlook cloudier: Davy chief economist, Rossa White, comments: "US companies have far exceeded expectations in their Q2 results. Early skirmishes have been dominated by technology and financials. But, overall, 78% of the S&P 500 companies to report so far have exceeded expectations. If that ratio is even one percentage point higher by the end of the quarter, it would mark a new record, beating the 78% out-turn for Q1 2010 (Thomson Financial began tracking data in 1994). Yet guidance has not been as strong for Q3: the negative-to-positive pre-announcement ratio is at the other end of the spectrum at the same point in the reporting season, and earnings expectations for the next year have been peeled back somewhat.

At first glance, the Q2 numbers jump off the page. Earnings growth of 33.7% (the Q1 final out-turn was +58.3%) has been recorded so far versus an estimate of 27.4% on July 1st. Revenues jumped 10% for the 175 companies to have reported; strip out energy (where higher oil prices than a year ago help flatter numbers) and the rise is 7%. But the outlook is definitely a bit cloudier. Some high-profile companies may have guided higher, especially in the technology space. However, that is not reflective of the overall market, albeit from a small sample size. The negative-to-positive pre-announcement ratio is 3.0 at this stage of the earnings season, in marked contrast to the really healthy 0.7 at the same point in Q1 (the long-run average is 2.1).

Base effects, too, matter for forward earnings. Certainly, Q2 2011 growth rates have been pulled back. So it is best to look at levels. Three months ago, the market expected earnings of $99.52 for the S&P 500 for 2011. That estimate has been cut to $95.86. Earnings for H2 next year have been trimmed more than for H1. Clearly, estimates for quarters further away in time are more difficult to predict. But nominal GDP forecasts for the US are steadily being pared for 2011. So the final earnings figure for 2011 is likely to end up lower than $95. At least a forward P/E of 11.5 (based on the current estimate) is providing room for expected downgrades."

President Barack Obama discusses the economy and the recent signing of the financial regulatory reform bill:

Economic View: Ireland’s External Trade Sector Regains Momentum; Goodbody economist, Juliet Tennent, comments -  - "With Ireland’s export sector expected to be the driver of growth over the quarters ahead it is encouraging to see that trade has regained some momentum following a disappointing April. Merchandise trade data show that the value of goods exported fell 2.3% yoy in the three months to May. With exports down 6.5% yoy for the three months to April, and 5% yoy in Q1, things are clearly moving in the right direction.

With the chemical and pharmaceutical sector accounting for almost 60% of exports, it is unsurprising to see that its value was 7.7% lower yoy in the 3 months to April, accounting for the weakness in the overall export performance in the quarter to April. While imports also continue to decline, the rate slowed to -1.8% yoy in the 3 months to May. This is the best performance since January 2008 and continues the moderation in the rate of decline that has been evident since the yoy rate fell by 26.4% in the 3 months to August 2009. Given that the external sector is essential to any near term recovery in the Irish economy, it is encouraging to see that activity appears to be picking up.
in the Irish economy it is encouraging to see that activity appears to be picking up."

Irish Financials; EU bank stress tests: Irish banks pass: Goodbody analyst, Eamonn Hughes, commented  -- "Headline figures: The EU released the results of its much awaited stress tests on Friday evening as conducted by the Committee of European Banking Supervisors (CEBS). Banks were tested under 3 scenarios over 2010-11; (i) benchmark, (ii) adverse and (iii) adverse + sovereign shock, with most focus on the latter test, which required banks to at least have a 6% Tier 1 ratio (in line with the US stress tests last year, though the EU tests reflected a 1-in-20 year event, more conservative than the 1-in-15 year test in the US). Only 7 banks out of the 91 (65% of EU banking assets) failed the test and will require immediate recapitalization of €3.5bn (Hypo Real Estate (€1.2bn), Agricultural Bank of Greece (€243m), and five cajas (€2bn).

This low figure in the context of expectations ranging from €30-85bn may raise some doubts about just how stressful the tests really were, but one can’t dismiss the substantial additional disclosures, which add massively to transparency and allow analysts to have a stab at conducting their own tests. So, a mild positive we presume. We note that a 6.5% threshold in the adverse/sovereign shock scenario would have seen a further 10 banks fail, whilst a 7% Tier 1 threshold would have seen 24 banks fail. Both AIB and BOI passed the test, with 6.5% and 7.1% Tier 1 ratios respectively under the adverse + sovereign shock scenario (from 9.5% and 9.2% respectively under the benchmark scenarios). This compares to a drop from 10.3% to 9.2% for the aggregate 91 banks due to €566bn of losses in the 2 year stress test period (€473bn impairment losses, €26bn trading losses and €39bn sovereign shock losses). So the Irish banks are in the bottom third of the rankings. The lowest of the UK banks, Lloyds, was in line with the EU average of 9.2%.

Implications for the Irish banks: Both AIB (6.5%) and BOI (7.1%) passed the worst case (adverse + sovereign shock) stress test, which highlights that the Prudential Capital Assessment Review (PCAR) undertaken by the domestic Financial Regulator (FR) earlier this year did its job, though AIB’s performance would still rank it 74 out of 91. The FR indicated that BOI has already met the PCAR targets and it continues to work with AIB to meet its year end deadline (so that’s still the target). However, we would note comments in the release from the domestic Central Bank and Financial Regulator, that it applied the higher loan loss rates than those used in the PCAR to both NAMA loans and the non-NAMA investment and development loans than was required by CEBS. This cost AIB 0.9% (otherwise 7.4%) and BOI 0.7% (7.8%) and whilst this would push both banks further up the list, this may be a nuance missed by the wider market as it focuses on the headline figures (and we are unsure of the nuances applied by domestic regulators elsewhere). The FR adjusted CEBS stress Tier 1 ratio of 6.5% at AIB gives it a capital buffer of €352m (closer to €1bn if unadjusted for the PCAR additions), whilst it gives BOI a much more comfortable €933m buffer (€1.5bn unadjusted). The extent of these buffers again supports our preference for BOI over AIB. Before we finish, we would highlight two more things worthy of comment. Firstly, we note the drop in cumulative Pre Provision Profit at AIB under the adverse scenario to just €901m over the 2 years, compared to €2.48bn at BOI. The difference is so great to lead one to suspect that it incorporates markdowns, which wouldn’t be sustainable, but we’ll revert when we get to the bottom of it. Secondly, we note that some of the main banks that have been linked as potential purchasers of assets from AIB score reasonably well, ensuring that they have the balance sheets to allow them to remain in the hunt (the main French banks on 9.0-10.0%, Intesa on 8.2%, Santander on 10.0% and HSBC on 10.2%)."