Irish unemployment should fall to 4 per cent by 2001 and could fall below 3 per cent before 2005, according to the latest Labour Market Update compiled for FAS.
Although economic growth in the Republic is expected to slow in the next couple of years, it will be more than offset by the rapidly declining numbers of young people entering the labour market.
The Labour Market Updates, which are prepared by the agency's economist, Mr Terry Corcoran, have provided one of the most accurate forecasts on employment trends in the past. He suggests that employment growth in 1999 and 2000 should be significantly higher than in official forecasts.
In the latest report he estimates that economic growth will slow to 6 per cent this year and next, compared with 8.5 per cent in 1998, and will fall to 5 per cent in 2001. While this will have implications for employment growth, he predicts it will not reverse the continuing rapid decline in unemployment rates.
The main reason is that the rate of "natural increase" in the workforce, which peaked at 40,000 in 1995, will fall to 20,000 by 2005. Again the report questions official projections. It says that the numbers of new entrants to the workforce from groups such as older women and immigrants may be lower than anticipated. The slowdown in economic growth that is occurring at present has been mirrored in employment growth. Employment grew by 7 per cent in the year ending April 1998, but only by 5 per cent in the year ending October 1998.
"The average employment increase for 1998 as a whole over 1997 is estimated at 6.4 per cent," the report acknowledges. "It is estimated that GNP rose by 8.5 per cent."
However, it goes on to point out that "by far the greatest contribution to this increase came from domestic demand - private consumption rose by 8.5 per cent, Government consumption rose by 5 per cent and investment expenditure rose by 11 per cent. The increased importance of domestic demand is one of the main reasons why economic growth in the 1990s has led to rapid employment growth."
The report adds that "virtually all of the reduction in growth is accounted for by changes in the external balance (exports minus imports); the forecasts assume that the main components of domestic demand will continue their robust recent growth."
In the context of employment expectations, the report says: "The GNP forecasts themselves now appear conservative. Indicators such as retail sales and the Exchequer balance suggest that the domestic economy has been more robust than anticipated in the early part of 1999. Further out, the recovery in the EU-11 and in the UK in late 1999 and 2000 is now likely to be stronger than was anticipated when the forecasts were prepared.
"These considerations suggest that, in the short term, the pace of employment growth will not slacken much further from the pace seen towards the latter end of 1998. Employment in 1999 should be about 4.5 per cent higher, on average, than in 1998, and a further increase of 4 per cent is anticipated in 2000. These increases are significantly above the employment growth implied in the official forecasts of 3.1 per cent in 1999 and 2.3 per cent in 2000."
On this basis, the report predicts that male participation rates in the workforce will rise to 76 per cent and female rates to 55 per cent. This would be among the highest participation rates for women anywhere in the world.
It states that there would be sharp falls in the number of young and long-term unemployed, two groups which have been particularly resistant to employment strategies. "The rate of unemployment among young people would fall to about 6 per cent by early 2001," the reports states.