The Central Statistics Office unleashed a slew of economic data this week. It shows, among other things, that the Irish economy is booming again, and grew by 7.8 per cent last year. This is more than three times the euro zone average and faster even than China.
Employment is also growing more rapidly than we thought – up 3 per cent, or 66,800 last year – and we’re now just 12,000 off the pre-crash peak of 2.23 million employed, which was recorded in late 2007 just before things went belly-up.
So what’s not to like?
Nobody believes our GDP numbers any more, not after a 26 per cent jump in 2015, which was famously derided as “leprechaun economics”. Even the CSO cautions against viewing last year’s 7.8 per cent jump as a reflection of real economic activity.
There are several reasons for this but perhaps the biggest issue stems from multinationals moving intellectual property assets such as copyrights, patents and trademarks here – a move that seems to have been prompted by a global clampdown on tax avoidance.
The numbers involved are so large that they distort our national accounts, mangling our headline growth figures in the process.
Is there an alternative to GDP?
When trying to isolate real economic activity here, the CSO prefers a different metric, known as “modified domestic demand”. This measures activity by calculating the total amount of money spent on goods and services by consumers, companies and the Government, while filtering out the statistical noise associated with certain multinational activities. It grew 3.9 per cent last year, which is half the GDP rate and closer to the growth in employment.
So is employment the best indicator of Ireland’s economic health?
Former Central Bank governor Patrick Honohan always maintained that employment was the best lens through which to view Ireland's recovery. While we'll soon eclipse the pre-crash peak of 2.23 million people at work, this time around we have a bigger population and a bigger workforce, meaning the employment rate will still be lower.
What about unemployment?
The turnaround in the State’s labour market is probably the most remarkable aspect of Ireland’s recovery. Unemployment has fallen nearly 10 percentage points, from nearly 16 per cent in December 2011 to 6.1 per cent last month, and we’re now on course to hit full employment (estimated at 5 per cent) early next year.
Fears that the crash would lead to a lost generation of long-term unemployed have also proved unfounded. The CSO figures show that the number of people out of work for more than a year now accounts for just 2.5 per cent of the workforce. That’s still more than 60,000 people but it is down from 9.8 per cent, or 215,700 people, in 2012.
Youth unemployment remains high at 12 per cent, however, and was highlighted as a negative in a recent OECD report on Ireland.
If things are so great, why don’t I feel rich?
It has been one of the great conundrums of the post-crash global economy: how the rapid recovery in employment has coincided with slow or nonexistent wage growth.
It was a factor in the Brexit vote in the UK and in the election of Donald Trump in the US. In Ireland, Fine Gael got knocked back at the last general election for playing up the recovery, partly because workers weren't feeling it in their pockets.
Normally when economies tend towards full employment, wages begin to rise as employers chase a shrinking pool of labour, but instead we’ve having a low-wage, jobs-rich recovery.
This isn’t easily explained.
It might be linked to digitisation, the gig economy and/or the general shift away from industrial-based economic activities to service-based activities, which is often characterised by low wages.
That said, the latest earnings data shows average wages here grew 2.5 per cent last year, the strongest rate of growth recorded since the crash. So maybe things are looking up.
