Irish Economy 2014: The economic recovery is real
but it may not be as strong as some headlines suggest.
A key employment indicator will be published in
two weeks and that will form the basis of the 2015 jobs forecast in October's
The CSO will publish the results of the Quarterly
National Household Survey (QNHS) for the second quarter and hopefully it will be
missing distortions in recent surveys that have arisen from adjustments arising
from the inclusion of Census 2011 results.
For example in Q4 2013, the 'Agriculture,
forestry and fishing' sector showed a jobs gain of 29,000 in 2013. That was
reduced to 14,400 in March 2014 - - both 12-month gains are wrong and appear to
have arisen because of underestimating in prior years. That issue was covered
In his October 2013 Budget speech,
Michael Noonan, finance minister, said that
"3,000 net new jobs are being created each month" and employment was forecast to
rise by 1½% both 2013 and 2014.
The Q4 QNHS in February 2014 showed that 61,000
jobs had been added in 2013 and the ministerial soundbite became "5,000 jobs
created each month" -- why employment would suddenly rocket from a standstill in
2012 was an inconvenient detail.
In May the CSO revised down its 12 month job
creation total to 43,000 and ministers went quiet.
Then in July, Richard
Bruton, jobs minister, cited CSO data that 70,000 jobs had been added
in the 18 months to March 2014 - -
but his arithmetic was wrong; CSO data showed that the total was 47,000.
The Government Budget forecast was a rise in
employment of about 30,000 in both 2013 and 2014.
the Exchequer returns for the seven months to July showed that taxes were up
€548m compared with the Budget 2014 target.
The budget consolidation of €2.5bn had provided
for a rise of €900m in taxes and the outturn so far has been positive. However,
income tax was up only 0.6% suggesting that there has not been a huge rise in
real job numbers above the minister's forecast.
Also this week, the results of the July
manufacturing and services PMI (purchasing managers' index) surveys were
published - - these surveys in particular in Ireland reflect a trend rather than
a measure of activity.
Newspaper reports gave prominence to the
superlative-laden analyses but official reports were rather muted.
Industrial production in the manufacturing sector
was down 18% in June after a spike of 32% in May.
The index is up 3.3% in 12 months.
CSO’s services index in June was up 0.5% in the month and 1.1% in 12 months
- - the media mainly ignored this report.
are 470,000 people in receipt of employment welfare, a large number of
households have high debt and
mortgage approvals are at a 40-year low.
The ESRI said this week that there may need to be a big rise in house prices to
trigger supply to meet demand. The economists also says that the high levels of
household indebtedness evident in the Irish economy, suggests future increases
in consumption levels may not be as large as the overall rate of economic growth
Half the current low level of house transactions are via cash and in Dublin
Daft.ie reported last month that the average asking price for houses on sale in
South Dublin County was €442,500 – a level above pre-bubble times.
According to Dallas Fed data, the Irish price/income ratio rose by 174% in the
period 1995-2007 while it fell by 59% in the period 2007-2013.
It's going to remain difficult for the typical
SME worker to get a mortgage.
Putting external threats
aside, a key aspect of the sustainability of the recovery, is the quality of
additional employment and so far, there have been few full-time earning employee
Relative to March 2011 when the current governing
parties assumed office, employment was up by 46,000 in Q 2014.
‘Self employed without any paid employees’ accounts for 29,000 while the number
of the unemployed in activation schemes increased from 71,000 to 85,000 - - the
number of unemployed classified as in ‘Back to Education’ courses was stable at
29,000 in March 2011 and 28,000 in March 2014.
Activation programmes thus account for a rise of
15,000 in the unemployed who are counted as employed.
‘Self employed without any paid employees’ is in
fact back to bubble times and it's reasonable to assume that many of the new
29,000 one-person operations are not entrepreneurs by choice.
The number of employees + self-employed with employees was 1.628m in 2011 and
1.643m in March 2014 – the difference of 15,000 is
entirely accounted for by activation scheme members.
So most of the 46,000 added since March 2011 are not in positions to get a
mortgage or have a significant impact on consumer demand.
Finally at an international level, German data this week has been mixed but
Deutsche Bank began the week with a report Monday saying the economy stagnated
in the second quarter and the outlook for the second half of the year is bleak.
German outlook for H2 2014 bleak according to Deutsche Bank
In summary, I remain an optimists but based on actual facts!