ECONOMICS: All the relevant labour market indicators point to a rising incidence of job loss among private sector workers over the past 12 months or so
I have long held the view that the most interesting and important data on the Irish economy are those published in the CSO's Quarterly National Household Survey.
The latest survey, covering the first quarter of this year, and published a fortnight ago, is no exception. It sheds some valuable light on the pace and pattern of economic activity in Ireland around the turn of the year. More pertinently, it provides a number of fascinating and timely insights into the state of the labour market.
According to the latest survey, overall employment growth in economy slowed to just over 2 per cent year-on-year in Q1, from 2.5 per cent in the previous quarter and an annual average of almost 3 per cent for 2001 as a whole. Economy-wide employment growth has been on a more or less uninterrupted decelerating trajectory since the middle of 1999, when it peaked at 7 per cent year-on-year.
More tellingly, private non-agricultural employment in Q1 was just over 1 per cent above its year- earlier level. This marks the continuation of an even steeper deceleration that dates from mid-1999, when it was growing by 7.6 per cent year-on-year.
At a sectoral level, the change has been especially marked in the case of construction, where employment was growing at an annual rate of 15 per cent three years ago, and has since slowed to less than 2 per cent. Even more notable is the case of the manufacturing industry where mid single- digit growth in numbers engaged has given way to a contraction: in Q1 industrial employment was down 2.5 per cent from its year-earlier level.
Most remarkable of all is the pattern of public sector employment. In the 12-month period to Q1 of this year, public administration, health and education accounted for 21,000 of the 36,000 increase in economy-wide employment that took place. Over this period, public sector employment rose by 6.5 per cent, or six times the rate achieved in the non-farm private sector.
Indeed, the rate of increase in public sector employment accelerated in this period - in the preceding 12 months it had grown at the somewhat slower rate of 5.8 per cent - while the rate of growth in private sector employment virtually collapsed. In this connection it is interesting to note that over the last four years the public sector has outstripped the private sector in terms of employment growth, achieving a cumulative increase of 23 per cent compared with 20 per cent.
One obvious implication of all of this is that the recent rise in unemployment - according to the survey, the numbers unemployed increased from 65,000 to 80,000 between Q1 2001 and Q1 2002 - would have been appreciably steeper had it not been for the considerable job-creating prowess of the public sector.
Another obvious implication is that, whatever about specific areas of difficulty, the public sector in general does not suffer from significant recruitment and retention problems, or at least not any more so than the private sector. It has clearly managed to expand employment at a rapid rate, not only through the recent period of a softening labour market, but also through the earlier period of very tight labour market conditions.
The QNHS is silent on the question of rates of pay, even if the employment numbers cited above are pregnant with all kinds of interesting inferences on the pay front. Still, no review of the labour market, however brief, would be complete without a quick survey of the latest available data on wage inflation. Here, the CSO publishes five relevant quarterly series: for industry; construction; banks, insurance and building societies; distribution and business services, and the public sector.
In three of the four private sector areas, a discernible deceleration in wage inflation is evident through 2001 in sympathy with the weakening of overall labour market conditions. In the financial services area, average weekly earnings, which were growing at a strong double-digit rate in the first half of the year, rose by less than 7 per cent year-on-year in Q4.
In distribution and business services, average weekly earnings growth of over 10 per cent in Q1 had given way to a significantly more moderate 6 per cent rate by Q4. In construction, the deceleration over the same period was from 10.6 per cent to 5.3 per cent. In industry, the picture of decelerating wage inflation is not so sharply defined. Still, average weekly earnings growth of 8.1 per cent in the final quarter was marginally lower than the 8.5 per cent rate recorded in Q2.
Again, the public sector presents a marked contrast. Granted, we don't have Q4 data yet - they are scheduled to be published today, actually - but the figures for the first three quarters indicate an accelerating trend, from 10 per cent year-on-year in Q1 to 11.5 per cent in Q3.
Moreover, it seems that in the latter part of last year average earnings growth in the public sector was not only accelerating, but was also growing at a significantly faster pace than in any area of the private sector for which the CSO publishes figures.
Meanwhile, all relevant labour market indicators point to a rising incidence of job loss among private sector workers over the past 12 months or so. For example, redundancies notified to the Department of Enterprise and Employment over the past 12 months, at just under 24,000 were almost twice the level of 2000 and comparable to the kind of levels last seen in 1987-88.
There was a time when the distinction between the exposed and sheltered sectors of the economy was an important element in shaping thinking on economic policy matters in the State. The extravagant successes of the Celtic Tiger era may have caused that distinction to be overlooked. Now that we have emerged into a cooler economic climate, the time has come to impress it once more on the collective mind.
Jim O'Leary is lecturing in the Economics Department at NUI-Maynooth.
