Unemployment Up to 11.4% in April

Today’s other release showed that exports continue to hold up well, while the decline in imports continued. Notable on the imports side was the sharp drop in Jan for final consumption goods (down 25%, as against 10% previously). Imports of capital goods were actually the highest in half a year, though still well down. Of course the weakness in exports is in the labour intensive side, so the high increases in unemployment might be consistent with a GDP outcome which is better than the ESRI forecast.

However today’s figures also indicate that Ireland is likely to run a CA surplus this year, which indicates the sheer scale of private sector saving at the moment, more than offsetting the borrowing of the public sector.

Karl
I presume you are too young to remember that this lauding of a negative second derivative in a key economic indicator was allegedly a trait of Dr G Fitz, esq, late of Merrion Square….
plus ca change….

That the rate of increase in unemployment is decreasing is hardly surprising: if the rate of increase continued to increase eventually no one would have a job.

I agree with Ronnie that Ireland is likely to run a current account surplus in 2009 and that private sector savings are amazingly high. The two are, of course, linked.

Hence, its quite ridiculous for the media to portray Ireland Inc as heading for bankruptcy. A country can only go bankrupt by running balance-of-payments deficits. Government budget deficits are secondary in this regard. If a country is running a balance-of-surplus, then, by definition, its generating enough private savings to cover its government borrowing.

For example, if Ireland were to totally (and I mean: totally) give up alcohol and tobacco, totally give up driving, totally give up going on foreign holidays, two things would happen: (a) the government budget deficit would go sky-high (b) Ireland Inc’s balance-of-payments SURPLUS would go sky-high. In these circumstances, it would be ridiculous to portray the country as heading for bankruptcy. If that were the case, it would mean that the more thrifty and more miserly the population of a country were, the more likely it was to go bankrupt. The technical explanation for the above scenario would be that, while the government’s budget deficit had shot up, so had the Savings Ratio (probably to about 50% in the above scenario).

This balance-of-payments surplus situation also makes Ireland totally different to the likes of Spain, Portugal, Greece, Iceland and most of eastern Europe, countries with whom we are being unfairly grouped. All of these countries are still running balance-of-payments deficits of 10% up to 30%. Indeed, the U.K. and U.S. are still running balance-of-payments deficits of 2% to 4%.

Its time Cowen and Lenihan got off their backsides and pointed out these elementary facts to the financial markets and the paddy-bashing British media. The only one who’s making any effort in this regard is Peter Sutherland.

We need bridging jobs to stop this now and we also need people who are experts in this area to start making themselves heard. With some noteworthy exceptions (including tomorrow’s ESRI conference) the coverage of this issue has been dreadful and people from outside reading this blog and other sources must imagine that we have no-one in Ireland interested in employment issues other than for the purpose of wallowing in depressing metaphors.

The absolute lack of urgency on this issue is turning unemployment into one of the first major irreversible casualties of the current recession. If most of the population can get through this mess having not experienced a major period of unemployment then the worst will not have happened. I don’t agree with the “burying banknotes” version of Keynesianism that says any projects will do. But, to have DFSA transferring wheelbarrows of money (in an aggregate sense) to perfectly healthy and productive people who would rather be working is insane and we cannot continue to view this as a sensible adjustment mechanism. There is now boundless evidence that these spells of unemployment are like an acute illness that leaves behind chronic damage both for economic prospects and psychological health.

DFSA officials should be in round-the-clock meetings with DETE, Finance, FAS, IBEC and Unions looking for a sensible way of getting everyone back into the labour market quickly and at the most revenue-neutral and non-distortionary way possible, in particular making sure that people can use their unemployment payment as a temporary “dowry” in the labour market.

I wait for the usual ideological argument that government cant solve this problem. It is certainly not solving the problem by just paying people to sit at home.

Current accounts can also improve as a result of collapsing investment.

@Kevin: That is part of the story, but only a small part.

Thats the point of my comment on capital/consumables above. Imports of producer capital goods (‘nice’ imports which we need for the future and couldn’t hope to import substitute) accounted for 27% of the import decline in December over total 2008, though only accounted for 14% in January. The fall off in consumables (imports which we can’t now afford, or could do locally through import substitution) have fallen off much more sharply. As such, the adjustment seems very real.

Overall, taking into account that much imports go into exports and presumably these imported intermediates haven’t fallen much given the strength of exports, implies that the decline in imports for domestic consumption is very sizable. Further, extrapolating the raw numbers suggests a CA balance which is not only positive, but quite sizable, and enough to allow for a bounce back of machinery imports.

This is all happening at a time when exchange rates are highly unfavourable. Whichever way you cut it, it does seem that the CA deficit was a function of the domestic imbalance, and contrary to common belief, Ireland does not have an external imbalance.

Any basket case economy can see its current account turn around by collapsing. Check out the good old Salter Swan model. The question is, what real exchange rate will be needed to get the current account back to equilibrium once we are back at full employment (whenever that occurs).

A bit off topic (or perhaps not?) but surely we could make at least some of the dole payment in some way contingent on doing some work. I can think of about 25,000 non-profit organisations on the island who could think of lots of things to do with spare labour.

If, between little and large non-profits, they could handle an average of 4 new State-paid volunteers for 10+ hours a week, that’s 50m extra hours devoted to Ireland Inc a year.

The growth in the live register numbers this month was much bigger for those over twenty five (4.8%) comparted to those under twenty five (2.4%) The difference is even bigger in the unadjusted figures. (1.4%) and (4.2%). I wonder is this a sign of migration kicking in since younger workers may be more likely to leave. The (unadjusted) under twenty fives on benefit rather than job seekers allowance fell this month (maybe workers exhaust benefits before leaving). It’s only one month so it’s highly speculative but maybe worth watching?

@Kevin: The CA deficit is a recent feature in Ireland, only emerging in 2005, as compared to many other countries. If we do have a chronic competitiveness problem, why has it only emerged in the last few years?

Consider:

> According to AMECO, our industrial wages in 2007 were far (-16%) below northern European country, and actually a little closer to Med countries (+11%). Our services wages were bang in line with Northern Europe, which almost certainly masks relatively generous public sector pay & relatively low private sector pay. One of the most dramatic features of the AMECO data is that including the construction wages figure reduces the average wage for most other European countries, but actually raises it for us, and is one explanation for relatively high wage rate increases in Ireland since 2000;
> Whether measured in terms of aggregate MNC employment, or more directly as exports, Irish trade performance has been good. Initially in 2002-2004 the trends are downwards as the electronic declines outweighed the rises elsewhere, tho subsequently the others took over;
> Non-pay costs in Ireland are relatively high, but are a minority of local costs (according to NCC data);

To be truthful, without knowing productivity of exports in 2000 & 2007, I cant be sure if we are more or less competitive. However I am 100% sure that the unanimity by which the ‘external imbalance’ story is believed is wholly undeserved given the data that is available.

Ronan – “a bit off topic”!! – as you indicate this is not off topic. We need to think about these initiatives. Any such initiative should be temporary and explicitly abolished once the labour market returns to some semblance of normality. It should also be as non-distortionary as possible i.e. explicitly make the case that the work is not displacing private sector activity. DFSA already have a model from the old student summer work schemes. This is not a solution to the global structural problems that are creating the current unemployment rates but it would be a good bridge for several thousand people who otherwise may be damaged in a much longer term sense.

@RonanL I’ve always believed in workfare over welfare, apart from the likely removal of people who may be abusing the system it seems pointless to have over 300,000 people with skill, talent, and potential productivity going to waste.

“I’m tempted to greet the four-tenths increase as a sign that the pace of slowdown is moderating relative to the disastrous increases observed in January and February.”

I expect the under-25s level of 81k to shoot up as graduations occur. There are c. 40,000 people graduating and afaik not one person in my class of 16 has secured “proper” employment yet.

@Karl: Given that it seems pointless to have over 300,000 people with skill, talent, and potential productivity going to waste, you might be interested to hear about the TalentTank.ie initiative.

According to this news story (http://www.fxcentre.com/news.asp?2402894), dozens of Irish companies have registered with TalentTank.ie, a new website that provides employers with direct access to hundreds of professionals offering their services free of charge. The founders of the website believe that it could help to get Ireland’s struggling economy back on track.

Commenting on the initiative, one of the founders explains that “Individuals have the opportunity to network with potential employers while employers benefit from higher productivity without incurring the labour costs. This initiative will allow Irish businesses to become more competitive and begin to set the foundation for future growth. As these businesses grow, so too will the need for new employees.”

Among the professionals already registered with TalentTank.ie to provide services free of charge are Accountants, Engineers, Architects, Sales and Marketing Consultants, Graphic and Web Designers, IT Consultants, Electricians, and Hotel and Catering workers.

Martin, In the spirit of things, I am happy to analyse their data free of charge if they want to test the case that this helps. I would be curious to know how many people do this, what type of people do this and whether the match actually works. Its an interesting question as to whether getting job experience is a better use of time than taking accredited training or starting a business.

Enda, good point. Many of the graduates at BA level will do Masters degrees. Masters graduates have a problem. Some will do PhD’s. But there’s about 10,000 who are snookered.

I know that two months don’t constitute a year, so there is plenty of time for things to change. And also that no figures are yet available for services exports and imports. But, for what its worths (and it might not be much), the ESRI full-year forecasts for exports and imports in 2009 can now be compared with what has actually happened in the first two months of 2009.

ESRI forecast for value of exports and imports (goods + services) in 2009:

exports: -4.5 per cent
imports: -9.7 per cent (gap of 5.2 per cent)

actual performance in first two months of 2009 (goods only):

exports: +0.2 per cent
imports: -23.3 per cent (gap of 23.5 per cent)

Were this trend to continue for the whole of 2009, it would make a nonsense of their forecast of a 9.2 per cent fall in GDP. So, for their sake, let’s hope the gap between exports and imports closes considerably in the remainder of 2009. How accurate have ESRI forecasts been in the past?

Liam,

Those are some interesting questions. How many people are on TalentTank? What type of people are they? Does it actually work?

Some very brief thoughts are that:

(i) there could potentially be as many people on TalentTank as there unemployed, with the constraint of them being aware of the website
(ii) presumably, some of the people on TalentTank might be the least competitive from their sector (and that’s why they are unemployed). But this could be very unfair and there must be some randomness in unemployment causation i.e. a “good” person whoi worked for a firm that went belly-up
(iii) Does it work? I’m not sure if it’s intended to be considered as a better use of time than training or entrepreneurship. The main thing may be that it’s a “use of time” and it’s “free”. Of course, there’s an opportunity cost involved for the individual supplying the service, but if I was unemployed and told that I could play around with Google search-data and call myself a Google intern, I’d certainly do it for free. For some people, getting a good offer from an employer that uses TalentTank might be a great CV-builder.

Ronan L Says:

THIS TYPIFIES WHAT IS WRONG WITH THIS NATION!

Ronan L Says:
April 29th, 2009 at 5:38 pm

A bit off topic (or perhaps not?) but surely we could make at least some of the dole payment in some way contingent on doing some work. I can think of about 25,000 non-profit organisations on the island who could think of lots of things to do with spare labour.

If, between little and large non-profits, they could handle an average of 4 new State-paid volunteers for 10+ hours a week, that’s 50m extra hours devoted to Ireland Inc a year.

SPARE ME PLEASE! It is not bad enough that this government has ruined the prospects of a nation and it’s future generation(s) through complete deriliction of duty. Too busy quaffing champagne in a glorified tinkers tent in Galway or satisfyning a lust for media attention and false glory. Cowen, the then “Minister” for finance did not lift a phone in four years to ask the then regulator, one Patrick Neary, “how was business?” He was Neary’s boss for Christ’s sake. Was this not grossly irresponsible of Cowen? If I had not heard from one of my key employees for 72 hrs barring holidays , leave etc, I would most certainly place a call to them.

Cowen did not even bother to phone Neary to ask him how got on at the Bankers Fedration Quiz night at the RDS, (Whats that say?).

Now we have some genius in “Ronan L” who thinks it is ok to exploit decent “ex hardworking” people who are in fact not responsible for the behavior of lazy, scheming, complacent, sloppy, self promoting, forked tongued spin doctored politicians and bankers with a gambling problem.

What is needed is a serious no bullshitting initiative to create jobs and put some life back into the economy. Screw the banks at this stage, there needs to be a central clearing facilitiy to open the Irish market to European banks who will lend to businesses and sort this shite out. Anyway, I am leaving this kip nation and god bless those who have to carry the burden of criminal disgrace.

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