Unemployment rate hits 10-year high of 7.8 per cent

Unemployment rose sharply last month as the number of people joining the Live Register of unemployment benefit claimants in November swelled by almost 17,000, the largest increase in the seasonally adjusted measure to-date.

The number claiming jobseekers' benefits rose by 16,900 to 277,200 in November to reach the highest level since September 1996. The number of people signing on for benefits is now 66 per cent higher than the same month last year and 106,864 people joined the register over the period.

The Central Statistics Office (CSO) now estimates unemployment has reached 7.8 per cent, compared to 6.3 per cent at the end of the third quarter according to the CSO’s Quarterly National Household Survey. The last time this rate was exceeded was in April 1998.

Alan McQuaid, economist with Bloxham Stockbrokers, described the latest Live Register figures as “truly awful”.

He said job losses were spreading from construction and were now coming from manufacturing, retail, transport, and financial services.

“November was the third month running that the redundancies total was more than double that of the corresponding month in 2007, a clear indication that things are deteriorating rapidly on the jobs front,” he said.

Mr McQuaid said the job losses were also contributing to the worsening Exchequer finances through lower tax receipts and increased social welfare payments.

Exchequer figures for the first 11 months of the year released yesterday show a shortfall of close to €7.5 billion in the amount of tax revenue collected by the Government, far worse than was predicted as recently as the Budget in October.

"It is estimated that it costs the economy €11 million for every 1,000 people on the Live Register” and suggested there was a strong argument for a cut in employers’ PRSI.

He was also critical of the strategy adopted by the Government in response to the downturn.

“The obsession with stabilising the public finances will not, in our opinion, solve the unemployment problem. Japan has a serious public finances problem, but that hasn’t prevented it from announcing a 3-year plan to boost its labour market at a total cost of $107billion”, he said.

Males accounted for the majority of the monthly increase with 13,600 joining the register compared to 3,300 females.

Brian Devine, economist with NCB said the increase of 3.1 per cent in the standardized unemployment rate to 7.8 per cent.over the last year was the largest on record and he forecast unemployment was likely to hit 10 per cent in 2009.

He said falling employment and consumer confidence would outweigh any boost to consumer income due to negligible inflation next year.

“We expect GDP to contract by 3 per cent in 2009 but within this domestic demand is expected to contract by 5.6 per cent. With no fiscal stimulus forthcoming, the Irish economy is dependent on a global recovery in late 2009 and for monetary policy to not only relieve debt burden but actually stimulate domestic activity,” he said.

Dermot O’Leary, Chief Economist with Goodbody Stockbrokers, said the deterioration was continuing to accelerate and unemployment was on course to reach 10 per cent by the end of 2009.