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News : Irish Economy Last Updated: Nov 5, 2010 - 3:12:53 AM


Irish Jobs Crisis: Better data reports and higher emigration; Market demand remains the key
By Michael Hennigan, Founder and Editor of Finfacts
Nov 4, 2010 - 6:29:35 AM

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Despite the surge in exports, by 2009, the numbers employed in foreign-owned enterprises was back to the 1998 level. In 2008, the total value of exports from Irish-owned companies reached only €13.4bn.

Irish Jobs Crisis: There was better jobs reports data than in recent times on the jobs market yesterday but rising emigration was likely a factor while market demand continues to be the key for significantly cutting the jobless numbers.

The number of redundancy claims received by the Department for for Enterprise, Trade and Innovation in October was 3,910 - - down 40% on the figure for last October  - -and the minister, Batt O'Keefe, who is in the Middle East on a trade mission, broke from normal practice of not commenting on redundancy data but couldn't avoid some spin. He said: "These trends, allied with our strong export performance, healthy foreign direct investment pipeline and declining unemployment figures, are very encouraging signs of economic recovery."

Maybe or maybe not.

The biggest news yesterday was the fall in October's Live Register figures which reflect unemployment, part-time work, PRSI credit claimants and others on State schemes.

Following six consecutive monthly increases in numbers on the Live Register (LR) over the period March-August, the data showed an improvement for the second month running in October. The seasonally adjusted 6,600 fall in the number claiming unemployment benefit represented the largest monthly drop in some fourteen years - - since October 1996.

In seasonally adjusted terms, the numbers signing on the Live Register fell by 6,600 to 429,553 in October and more than one in three claimants had been out of work for more than 12 months. In October 2009, the proportion was just over one in five.

Brian Devine, economist at NCB Stockbrokers commented: "We have no timely data on employment creation and emigration. In other words it is impossible to decipher whether emigration rather than job creation is causing the large outflows from the live register. It is likely a combination of both, as even in the good times Ireland was characterised by a large amount of churn in the labour market, with for example approximately 13% job gains in 2006 versus 10% job losses for a net gain of 3%. This points to the flexibility of the Irish labour market, which is ultimately required for Ireland to dig its way out of its problems."

Further to Brian Devine's reference to 2006, it should also be said that 83,000 net new jobs were added in that peak bubble year with only 6,000 in the international goods and services sectors - - equally split between foreign-owned firms and indigenous ones.

Ballina in County Mayo had the highest unemployment rateamong large Irish towns, with 15.8% of its labour force out of work. Tralee (14.2%) and Dundalk (13.9%) also had high unemployment at the time of the 2006 census while at the other end of the scale Malahide (4.3%) and Leixlip (4.4%) had the lowest rates.

This was Ballina during a boom!

We recently said that at least 180,000 net new jobs are required to return to full employment, without allowing for working age population growth.

This is a challenge that gets little attention and it's clear that Minister Batt O'Keefe and his colleagues are happy with existing mantras  --  which should be discredited on the basis of the facts. 

Last month economists at the US think-tank, the Brookings Institution, issued revised estimates of the US 'jobs gap' - - the number of jobs that needs to be created for the economy to return to pre-recession employment levels and to absorb the 125,000 new entrants to the labour force each month.

Based on the September unemployment numbers, the Brookings' economists estimated the job gap grew to 11.9m jobs, widening for the fourth month in a row.

The economists said that if the economy adds about 208,000 jobs per month (the average monthly rate for the best year of job creation in the 2000s) then it will take almost 12 years to close the job gap. At a more optimistic rate of 321,000 jobs per month (the average monthly rate for the best year of the 1990s) the economy will reach pre-recession employment levels only after five years.

The Irish Times is this week publishing a series of articles on the jobs market with a focus on improving employbility through training and labour market reforms.

Using a rebranded FÁS to provide more courses is not a good idea and a new State agency should have input from overseas professionals who have proven track records in this area.

Given that only 11,000 net jobs were added in the Irish internationally traded goods and services sector in the period 1998-2007, how long will it take to add say 200,00 net new Irish jobs, without allowing for changes in population?

Irish Prime Minister Brian Cowen joined CNBC to discuss the country's economic outlook. The cost of protecting Irish government debt against default jumped to a historic peak on Wednesday as investors fretted about the cost of bailing out its shaky banking system:

The issue of unemployment is still dominated by spin and denial.

The world has changed and the question now is how much of unemployment is cyclical and how much structural?

It's just not good enough to talk about foreign direct investment (FDI) pipelines and rising exports while being blind to emerging trends.

As illustrated by the chart above, exports grew more than 50% in nominal terms in the past decade but no net jobs were added.  

The US-dominated pharmaceutical/medical devices sectors account for more than half of Irish merchandise exports but most of the announcements on jobs in these sectors in the past 2 years have been on cuts. Besides, with patent expirations and a low flow of new products from massive R&D spending, the industries face big challenges.

The centre of global economic gravity is gradually moving to Asia  where they are developing educated workforces.

Ireland remains very dependent on US firms but as a manufacturing location, we are remote from the fastest growing global markets. While we will likely pick up some FDI projects from China and India in coming years, our past experience with Japanese and South Korean FDI investments hasn't been good.

Irish competitiveness has improved because of the recession rather than reform and while it helps, developing presences in international markets is usually a long, hard slog.

Foreign firms are responsible for 90% of exports and decisions regarding destinations are not usually made in Ireland.

There is no obvious growth engine despite the mantras on exports; only fools believe that university research is the main answer; upskilling and short-term measures can have some short-term benefit, but why should we believe that we can generate jobs from multinational exports to debt-challenged advanced countries now, given the very poor recent record during unprecedented credit and asset booms?

SEE: Finfacts reports:

The invisible Irish unemployed and the challenge of creating 180,000 net new jobs - - recent analysis with links to several other relevant reports

Germany’s jobs miracle; For first time since 1970s unemployment falls below its level before previous recession

“The one area where we significantly lost our way from a business perspective is competitiveness. The costs of doing business in Ireland had grown excessively. That is coming into line very very quickly” Gary McGann, CEO of Irish paper and packaging company Smurfit Kappa Group told CNBC:

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