Lockdown exit: Are young people again in the firing line?

The Covid-19 employment shock is not hitting all sections of the population equally.

So far, judging by those receiving the special Covid payments, the biggest losers are younger sections of the workforce, and rural Ireland.

However as the economy reopens, how will this evolve in the months ahead? Many may get a marker this weekend of when they might return to work, but for a significant minority, uncertainty will continue.

Let’s look at the evidence.

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1. The unemployment data

The unemployment data published for March was a key indicator of the scale of what has hit us, with the unemployment rate – when those on the Covid-19 Pandemic Unemployment Payment (PUP) are counted in – rising to 16.5 per cent.

It will have jumped further since, though the numbers will jump around as some people move from the PUP back to employee wage supports. The CSO points out that all of those receiving the payment are not properly counted as unemployed, on normal definitions as – we hope – many can return to work as the economy reopens.

So what does the March data tell us?

It is clear that the scale of the hit was greater for younger age groups, with the unemployment rate, plus those on PUP, for the 15-24-year-old age group rising to 34 per cent, from 11.4 per cent the previous months (see graphic). This is a rise, in terms of numbers from 36,732 to 101,789. In contrast, the overall unemployment rate is 16.5 per cent.

Youth unemployment always tends to be higher – people leaving school or college may take time to find a post, may move between jobs and many will be living at home.

The bulk of the labour force in this age category is not surprisingly in the 20- to 24-year-old range. However, the big monthly jump is still striking – and we know that some of the sectors shut down, such as construction, hospitality, tourism and leisure have a high percentage of younger employees.

The data does not include those on the Government wage subsidy scheme as they are still employed.

ESRI economist Dr Barra Roantree has mined the data and calculated that for 18- to 24-year-olds, the numbers on the PUP were equivalent to more than half the workforce in that age group. This is roughly twice the average.

It reflects the high employment of this group in the hospitality sector, in particular, where 70 per cent of employees are on the payment, according to his calculations and in construction, where it is around half.

2. The regional spread

An analysis by Ibec economist Gerard Brady of the numbers on the Covid-19 payment and the wage subsidy scheme shows an interesting picture (see graphic) .

Regional areas appear most exposed, as they have a bigger share of employment in closed or exposed sectors. Three counties with big tourism sectors – Donegal, Kerry and Wexford – have the bigger proportion of the workforce reliant on the pandemic unemployment payment, with levels around 45 per cent of the workforce.

When looking for the highest proportion on both wage subsidy and the pandemic payments, many of the Border counties come out worst, along with Carlow and Westmeath.

The big cities – Cork, Dublin, Limerick and Galway – will have significant numbers on both payments, but they account for a smaller proportion of the workforce as they would have more diverse industrial bases and many big multinational players, many of who have remained open.

Within regions some cities and towns will also be particularly exposed to the initial Covid-19 hit. For example, the economy of the west has a higher proportion of income and employment in tourism and hospitality than the average.

Some one in 10 jobs in Galway city are in this sector, for example, and the numbers rise in some tourism-dominated towns near the coast.

The Western Development Commission has estimated that 27 per cent of employment in Clifden is in hospitality, for example, with towns such as Bundoran and Westport also over 20 per cent. As overseas tourism will be a write-off for this year, the only hope for business this year will be from "staycations" and the consumer mood towards these remains uncertain.

3. The outlook

We know younger workers and rural Ireland have taken the heaviest hit proportionately in the first stage – though for now incomes for many are supported by the Government. But what of the outlook?

This is harder to judge for two reasons. First, we are not clear of when businesses can reopen and, perhaps more importantly, what state companies will be in when they do reopen and what demand will look like.

How many will not be able to open the shutters at all and at what level will others operate? Building sites may come back, for example, but what will question marks over housing and office demand mean? Restaurants may reopen but what will demand be like?

The second unknown is the knock-on economic impact, which will be huge as demand falls not only in Ireland but across the world economy.

The motor trade is worried about car sales, universities have lost foreign student income for now, bus and rail company revenues are way down, exporters will be selling into markets in recession and on and on across most sectors.

Against such a backdrop, it is impossible to be precise. However, looking at the economic sectors and the detailed breakdown of job categories produced by the CSO, it is clear that hundreds of thousands are in sectors which will at best open in a very limited fashion this year or in some cases remain largely closed – and thus significant job losses are certain.

This includes hospitality (180,000), retail (215,000) – where the non-food element employing 100,000 plus is under threat – and a combination of smaller sectors like most of the arts, leisure services such as gyms, and the sports and events sectors.

Drilling down further into sub-sectors you can spot sectors such as leisure and travel services – travel agencies, travel tour firms and the like – which employ 16,300 people, hairdressing where 26,000 are employed and air transport, where 8,500 are employed, as ones facing particular challenges.

Again, many of these sectors are dominated by a younger workforce and many – tourism, hospitality and retail – have a greater importance in rural Ireland in terms of employment.

Beyond that there will be a wider employment hit across the economy, but the prospect of semi-closure for some sectors is something we have never really seen before – perhaps with the exception of what happened to building in the last downturn, albeit over a longer time-scale.

Even after reopening, many younger people in particular will remain out of work.

So the Government faces two challenges. It faces sectors which will not reopen, or will struggle to reopen for the rest of the year – tourism, hospitality, parts of the sports and leisure sector, for example – and a question of how to deal with the employees from these sectors currently on the PUP.

And beyond that it faces the second round impacts in companies contracting and laying off staff or at least imposing job freezes across the economy in a wide range of sectors.

From a position of near full employment a few weeks ago, everything has changed and the uncertainty facing many households is now significant.