Cliff Taylor: Boomtime headaches are getting boomier

The boom is getting boomier again, even if this time around it is different. And nowhere is this clearer than the jobs market,Businesses, recruiters and advisers all now report that many skills are in short supply and the scramble for staff is well and truly on. Not only attracting new staff, but retaining existing ones is a big headache.. We do not have the credit-fuelled, inflationary boom which peaked around 2006, but a post-crash economic bounce has now turned into a fast-paced growth spurt, driven by rising employment, The economy is on the crest of a wave.

Back in mid-2006 the rate of inflation was surging over 4 per cent. In response, then taoiseach Bertie Ahern famously declared: "The reason it's on the rise is because probably the boom times are getting even more boomer."

However, 2018 is not 2006 all over again. There is hardly any overall inflation in consumer prices. But the housing market and rents are major exceptions, signs of a severe blockage in a key area of the market which could have significant implications for growth and jobs in the years ahead.

This week's news that Ires Reit, the listed property group which is the State's largest landlord, is looking for €1,500 a month in rent for an unfurnished one-bed apartment in a development it has just bought near Finglas shows just how intense the housing and rental squeeze is becoming.This is not in the city centre, but around five miles to the north. Housing supply is growing, but not nearly as fast as demand and central to this is rising employment.

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Jobs market

We are again seeing some of the same “bubbling” in the jobs market as we did in the mid-2000s. Since around the turn of the year, many areas of the jobs market have really started to tighten. Now it’s the first topic raised by many business owners and managers when you bump in to them. “ I just can’t get hold of staff.”

The collapse in the jobs market was vicious and the rebound has been extraordinary. The unemployment rate bottomed out at 4.5 per cent in 2005-2006 and topped out at 16 per cent in early 2012, when it felt that the economy would never recover. Now, the total number of people at work is probably back above its boomtime peak and the unemployment rate has dipped below 6 per cent.

Dublin has to be developed, and the question remains whether we have really got a consensus that the kind of dense, high-rise development championed in the Government's investment plan is the way to go – and will be delivered

Many sectors are at or close to capacity in terms of available labour and across the board there is a scramble for staff. In some cases this is due to sectors that are booming – technology, for example, reflecting not only foreign investment but also the pervasiveness of tech in most areas and specific factor such as the new GDPR rules.

Some sectors are also hit by shortages of younger people with relevant skills, due to the shuddering halt as the bust hit in anyone training for any trade or profession connected with property or construction. Try find an electrician now, or a newly qualified architect, or a lawyer or accountant specialising in property. Meanwhile the inward move of banks and insurance companies diversifying out of London ahead of Brexit – with more to come – is creating more demand.

Meeting these needs means more people need to come from education with the relevant skills – and a lot of planning is needed here – while we also need to attract people with key skills from abroad. And they all need somewhere to live. Right now paying people enough to allow them to afford accommodation is becoming a big issue for business.

Rising wages are a natural part of a recovering economy, particularly as it approaches full employment. After stagnating in the long climb back from the crash, earnings growth was running at 2.5 per cent at the end of last year and this has surely now accelerated. Earnings increases are good, but in some sectors the scramble for staff is starting to threaten competitiveness.

During the crash, as house prices and rents fell, Ireland became more affordable, even if consumer prices remained close to the top of the European league. We have low inflation right now but the cost of living here is high. For example, in areas such as insurance and legal costs, prices here are still too high, and now housing costs are shooting ahead too.

Competitiveness

Dealing with this is not only the key to attracting new investment to Ireland, it is also central to the overall competitiveness of the economy. And while competitiveness “ leagues”should be taken with a pinch of salt, this week’s finding from the World Economic Forum that Ireland is slipping down the league of countries internationally rings true.

These pressures will be a big driver of government policy. The housing squeeze shows no signs of easing. And one thing to watch is whether industrial investors can be encouraged to go outside Dublin to the other cities or even more rural locations. If infrastructure such as broadband can be got right, there may be an opportunity here, as employers reckon they can attract staff with the promise of a more relaxed lifestyle. But Dublin has to be developed, too, and the question remains whether we have really got a consensus that the kind of dense, high-rise development championed in the Government’s investment plan is the way to go – and will be delivered.

Of course economic growth could be thrown off track by a hard Brexit or all manner of other things. But congestion and the housing crunch are the things within our own control which, if not tackled, could lead to economic growth running into the buffers over the next few years. Housing is surely a social crisis for Ireland, but it is fast becoming an economic one, too.