ANALYSIS: If true, a report by Ernst Young that the numbers at work will not return to 2007 levels until 2031, is cause for despair
IN MAY the dole queues lengthened and factories produced less. Two sets of numbers published yesterday add to other recent indicators which suggest that the economy continues to weaken.
On Tuesday it was revealed that in April all forms of bank lending to households contracted yet again and that lending to business declined by the largest amount in 15 months. The banks are not lending because they have less cash to lend – the same figures showed that the banking system continued to see a depletion of deposits last month.
Last Friday, retail sales figures for May showed, depressingly, that people continue to spend less in the shops. This is significant because until such time as consumer activity picks up, there is little hope of generating the sort of employment growth that would cut high levels of joblessness.
In sum, every indicator that has been published to date points to a bad start to the second quarter of the year.
The numbers on welfare are particularly depressing. More than 443,000 people registered for unemployment benefits in May. That means that more than one in five people in the workforce are claiming unemployment benefit.
Yet separate figures that are the accepted measure of joblessness show that 299,000 people were unemployed at last count. The anomaly whereby 21 per cent of the workforce is on the dole while the unemployment rate is just under 15 per cent has long been known.
Just how unusual it is in an international context was made plain last week when Patrick Lenain, an economist at the Paris-based OECD, said that he knew of no other country in the 34-member bloc where more people received unemployment benefit than there were unemployed people.
Yesterday’s figures on the numbers claiming unemployment benefit coincided with a visit to Dublin by the European Commissioner for Employment and Social Affairs Lázló Andor.
The employment and social affairs directorate-general (D-G) that he runs has historically pursued a “social” agenda while other directorates-general, such as Olli Rehn’s economic and monetary affairs D-G, have pushed a “competitiveness” agenda. In normal times that is a healthy balance. In times of crisis, having different parts of an organisation pulling in different directions can hinder decisiveness. Yesterday Andor welcomed the reversal of the cut in the minimum wage that Rehn’s people had wanted when they were putting the EU-IMF bailout in place last November.
Whatever one’s view on the level at which the minimum wage should be set, changing it and then reversing the change within weeks is good for nobody.
If May’s indicators give little reason to believe things are on the up, a report by Ernst Young this week gave reason for despair. The consultancy’s economists came out with the grimmest forecast yet. They believe that the numbers at work in the Irish economy will not return to 2007 levels until – wait for it – 2031.
We had a lost decade in the 1980s. Let us hope that the people at Ernst Young are wrong and that we are not in the early years of a lost quarter-century.
