State training agency FÁS has predicted 193,000 jobs will be created over the next five years, but warned that job losses "are inevitable" over the next two years.

The organisation has completed a review of prospects for the Irish labour market on behalf of the Expert Group for Future Skills Needs and concluded that a "return to a level close to full employment is expected in the medium term, with the most significant growth rates likely to occur in occupations such as managers, professionals and sales workers".

But FÁS warned that all sectors, with the exception of non-market services, will experience a temporary fall or levelling-off in employment in the short-term. "The current slowdown will have a negative impact on the demand for labour in the short-term, with employment growth expected to be much lower in 2002 - and possibly even negative," FÁS said. The unemployment rate will rise significantly, the agency warned.

Despite this, the report suggests that employment policy should be focused "on addressing medium-term needs, given that demand for labour is expected to be strong in the coming years". Measures to increase both the size and skills of the workforce are needed in order to avoid a loss of competitiveness when the economy recovers, according to FÁS.

The suggested measures include increasing the flexibility of the workforce through continued investment in advance skills training. FÁS argued that this sort of police response is particularly relevant "given the number of young people entering the workforce is set to fall significantly over the coming decade".

FÁS has also recommended programmes targeting those who will lose their jobs during the slump. "Programmes with strong linkages to the labour market are required to ensure that those made redundant in the short term will be equipped with relevant skills so that they can regain employment as the economy recovers," FÁS said.

The agency pointed out that in the 1980s, lack of appropriate intervention meant short-term unemployment led to long-term joblessness for many people.

The report also says the Government's immigration policy should be more selective and target only non-nationals who "are qualified in occupations where there is a clear shortage".

The current economic slowdown will be temporary and, in consequence, policies should be based on the medium-term outlook, which is for growth rates of between 4 and 5 per cent per annum, according to FÁS.

Decisions about future third-level education and training provisions should be based on the medium- and long-term outlook, which will mean greater demand for increasingly qualified and skilled workers. The report recommends further investment in IT skills training.