Today’s release shows that the standardised unemployment rate, which is based on the Live Register, rose to 11% in March from 10.4% in February. Over the past three months, the unemployment rate has risen by 2.4%, compared with an increase of 1.4% over the previous three months.
In terms of projecting GDP for the year, these figures suggest to me that the current “consensus” figure of something like a 6 percent (average-over-average) decline for 2009 is highly optimistic. It is hard to see this huge jump in unemployment as consistent with anything other than a substantial contraction in output in first quarter. With output having fallen by around 7 percent on a Q4-over-Q4 basis last year (whether measured on a GDP or GNP basis) the cumulative loss in output from peak has perhaps already reached 10 percent as we speak.
Once you factor in the contractionary effect of the upcoming budget, it is hard to see the economy producing a quick turnaround after the first quarter. Working through the various scenarios along the lines of my post from last week, it’s very hard to see an average-over-average growth rate better than -8% this year and very easy to imagine scenarios that are worse.
4 replies on “Unemployment Up to 11% in March”
Brendan Walsh estimated an Okun equation for Ireland a few years back which, as I recall, fitted the data surprisingly well for the sample period – 1960-2002. It was DeltaU% = -0.25(DeltaGDP% – 4.96). Given the CSO’s estimate of the increase in the unemployment rate between Q1’08 and Q1’09 (5.3% pts on a quarter average basis), Brendan’s equation suggests a volume decline in GDP of about 16% over the same period. This number is so big that it’s hard to write down without flinching. Obviously, one doesn’t want to lean too heavily on an Okun equation, even one estimated by BMW, but it points in the same direction as Karl’s post.
Given that the downturn in GDP has been largely accounted for by the poor performance of the labour-intensive sectors of the economy, would it be fair to conclude that DeltaU% is now significantly higher in negative terms and hence the true decline in GDP is likely to be somewhat less than the 16% suggested by the 1996-2002 Okun equation?
A fair point, Brian. And there’s another, with the same broad effect, that could be added. It’s that, attractive emigration options being in shorter supply than in previous downturns, the likelihood of people who lose their jobs in the current environment joining the dole queues is higher. Thinking aloud though, in making this point, it is probably useful to distinguish between nationals and non-nationals. Interestingly, if you apply BMW’s equation to the period Q4’07 – Q4’08, it ‘predicts’ a 9% y/y fall in GDP. This compares with the CSO’s recent estimate of a 7.5% decline.
i think you may be overestimating numbers and contraction, march was interesting in that their was a solid drop in the rate of increase, if that is replicated in april we may be over the worse of the increases, also consumption will be expected to rise over the summer months as feel good factor kicks, in the ecomomy while the government is pulling money out in increased taxes this is probably more than compensated by morgage rate reductions, maybe I am overoptimistic but people have run down debt and increased savings over the last six to 9 months they will soon start to spend again once they feel any security. this is why i think that improvements in usa will come through faster than we expect in irish improved performance,