Perspective on the Labour Market

As readers will be well aware, the Irish unemployment has soared since the end of 2007. Most of the short-run commentary focuses on the monthly Live Register (LR) figures, which we know contain many landmines of interpretation.  The Quarterly National Household Survey (QNHS) data are based on more economically meaningful (ILO) definitions, but these too need to be handled with care. (For example, anyone working for pay or profit for one hour a week or more is classified as employed.)

The survey data allow us to look at the employment rate  – that is, the proportion of the adult population in employment – and this is probably more meaningful as a current economic indicator than the unemployment rate.  (The employment rate is the product of the labour force participation rate and (one minus) the unemployment rate.)

A look back at the employment rate over the past twelve years is interesting.  The male employment rate has fallen by five percentage points – from 70.5% to 65.5% – since the third quarter of 2007.   (N.B. These figures are not seasonally adjusted, but I do show the four-quarter moving average.

This brings it back to where it was in the late 1990s.  The female employment rate dropped by only two percentage points – from 52.7% to 50.7% – over the same period.  This leaves it where it was in 2006. The overall rate fell by three and a half percentage points, from 61.5% to 58.0%, so it is back to here it was in 2004. Female participation held up well in 2008, but male unemployment has risen, and participation fallen, faster. 

The continuing relatively high participation rates is one hopeful sign in an otherwise gloomy landscape. The forthcoming QNHS for the first quarter of 2009 will probably show further rises in unemployment and falls in participation, but perhaps later this year there will be signs of stabilisation.

7 replies on “Perspective on the Labour Market”

Very good analysis. It would be interesting to see similar graphs going back to, say, the 1970s showing employment rates, where an adjustment was made for part-time employment (using perhaps a crude measure in which a part-time job equated to 0.5 times a full-time job).

Although it would not be easy to construct such graphs as CSO data is somewhat lacking for before 1997, I believe they would show that, even on the most pessimistic forecasts, the employment rate at the bottom of this global recession will be much higher than even in the best years in the 1960s, 1970a and 1980s. If memory serves me right, the employment rate even in the best years back then was in the region of 40%.

There has been a fundamental paradigm shift with respect to employment and salaries and wages. There has been a slow, steady drift away from well paid (relatively) production, manufacturing and construction jobs toward less well paid service jobs. The 2001 – 2008 credit boom masked part of this shift, but it was finally exposed by the end of the residential and commercial construction bubble.

The implications of the massive increase in the world labour market, with the consequential decrease in wages for this country are that we will have endemic un-employment for perhaps a generation (you have to try to re-absorb the existing adult un-employed, plus the annual increase due to school leavers entering the labour market). The deflation in wages and salaries is also inevitable – though there is a lower limit below which these rates cannot go without inflicting real economic and social hardship.

Energy and food costs will soon start to increase – problems with fossil fuel supplies. This will only aggravate the situation.

The other matter to consider is your economic Model-in-Use. No one seems to understand that the current model, Permagrowth, is on life-support. If there is no annual ‘growth’ – where then?

Brian P

In the US, the broad measure of unemployment, which hit 16.4% in May, appears to be getting increasing attention.

It is clearly more meaningful than the official rate of 9.4%.

The official rate doesn’t include “involuntary part-time workers” – – the 2.2 million people who took a part-time job because that’s all they could get, plus those whose work hours dropped below the full-time level etc. Once those 9.1 million workers are added to the unemployment mix, the rate would be 16.4%. All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in May.

The Irish data on unemployment is confusing.

The Saturday Irish Times headline read: “Number of unemployed over 400,000”

The CSO said in its release for May that in the month, the estimated number of casual and part-time workers on the Live Register was 35,588 males and 30,590 females.

That leaves 336,000 others in May.

The Quarterly National Household Survey was 171,000 in Nov 2008.

Diff 165,000

The addition to the LR since Dec was: 16,300, 33,000, 26,700, 20,000, 15,800 and 13,500 = 125,300

@Michael Hennigan
I agree that the interpretation of the unemployment data is tricky – in fact, I wrote about these puzzles in the Spring 2003 issue of the ESRI’s Quarterly Economic Commentary:
Maybe it is time to update this article.
On broader measures of unemployment – which were also the subject of much debate in the past – the QNHS includes three additional “indicators of potential labour supply” (Table 20). The measure you refer to is labeled S3. It includes several categories of “discouraged workers”, as well as under-employed part-time workers. This rate has risen at much the same pace as the narrower measure of unemployment – from a low of 7.3% in mid-2006 to an end-2008 level of 10.9%.

@Michael Hennigan:
I agree that the interpretation of the unemployment data is tricky. In fact I wrote an article on this problem for Spring 2003 issue of the ESRI’s QEC:
It’s time to update this!
In addition to the conventional unemployment rate, the QNHS publishes three “measures of potential labour supply” (Table 20). The measure you refer to is S3 and includes several categories of “discouraged workers”, as well as under-employed part-time workers. This rates rose from 7.3% in mid-2006 to 10.9% at end-2008. This pace of increase is much the same as that of the conventional unemployment rate. So while it may be more meaningful as a measure of potential labour supply, it tells much the same story (in terms of trend) as the conventional unemployment rate.

@Brian: It is a myth that services jobs are inferior to manufacturing jobs, though as with many myths, it has an element of truth. Services jobs account for a higher proportion of low skill jobs, tho also account for a higher proportion of high skill jobs. In the US, more than 30% of service jobs are in the highest-skill category of occupations, which includes managers, researchers and engineers, in contrast to only 12%
of all manufacturing jobs.

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