I don’t have time to report any detailed analysis of today’s Live Register figures but it is worth noting that September was the first month since December 2007 in which the unemployment rate did not rise. The standardised unemployment rate remained at 12.6%. As an aside, I’d note that this is still two tenths higher than the rate previously reported for August because higher second quarter unemployment in the QNHS, upon which this measure is based, saw the previous figures revised upwards.
Combined with last week’s GDP release, which showed flat seasonally adjusted GDP in the second quarter—consistent with a 6.7 percent year over year decline if GDP stayed flat for the second half of the year—there are now good reasons to believe that the economy is bottoming out. Of course, there must be concerns that further fiscal contraction could undo this stabilisation but hopefully by the time this kicks in there will be a decent world recovery to help out.
54 replies on “September Live Register”
The slowing rise in the rate of unemployment will clearlyhave a positive effect on numerous areas of the economy, most notably in helping the Government frame its 2010 Budget.
Last April, the Government forecasted that the Live Register would average around 440,000 in 2009, which is consistent with 525,000 on the Live Register at the beginning of 2010. It now looks likely that the actual starting point for 2010 will be around 435,000.
For 2010, the updated projections for the Budget will pencil in the number of people signing on in 2010 as being on average 100,000 lower than the Government had anticipated in April, resulting in very significant savings.
If memory serves, most of the slowdown in the rate of unemployment growth from the recently published ILO figures was attributable to an eyebrow-raising increase in public sector employment sectors (sectors O and Q).
This would suggest that Karl’s comment that “there must be concerns that further fiscal contraction could undo this stabilisation” is an understatement.
Don’t forget the building role of:
Falling participation, and
Net emigration.
@Graham
Can you support this with actual numbers? If the McCarthy report ‘target’ of 17,300 is fully delivered through natural wastage over (say) a three year period, this woul be equivalent to around 0.3% per annum reduction in public secvice employment.
A more intruiging (and equally dataless) guess is that for some reason the expected pattern of unemployment lagging one year+ behind the end of the recession may not be as prominent this time. The increase in UK sign-on in August was very small, and German unemployment has actually fallen.
While ordinarily we expect firms to horde labour long into a recession, resulting in unemployment lagging, could the fact that this recession was ‘pre-accounced’ in the financial markets + lehman meant that firms were unusually agressive in reducing employee numbers much earlier?
Considering there isn’t much of a let up in the number being made redundant, this would just seem to suggest that emigration is the running at a few thousand a month.
Hardly anyone reads my blog, but I did a post on this subject a few days ago, based on Q2 v/s Q1 QNHS data. See: http://congregg.wordpress.com/2009/09/25/why-is-the-unemployment-rate-increase-stalling/#more-279
As of Q2, numbers employed in industry, construction and agriculture/forestry/fishing and a number of domestically traded services sectors were still falling rapidly, whereas numbers in sectors dominated by the public sector, and in sectors where the State can be argued to have an influence on employment levels, were rising.
I suggested that we may be seeing the effects of a somewhat subtle stimulus package.
Ronnie
Actual numbers on the bottom of Page Seven, here:
http://www.cso.ie/releasespublications/documents/labour_market/current/qnhs.pdf
However, I should note that the same ILO figures contained a huge silver lining for me, which was that the % of the labour force now employed in the infamous NACE Sector F in Ireland is down to 7.9% from the once-lofty heights of something like 15%.
7.9% is very close to the EU ten-year-average of 7.6%.
I think that you are all greatly exaggerating the effect of the public service, as if some massive Spanish-style employment programme was going on, though on the hush. Total public service employment to the end of March (from the separate CSO publication) shows a fall of 2,000 from December 2008. Further, emigration IS endogenous, so I can’t believe that it can result in an early stabilisation in the unemplyoment rate.
In summary – unemployment didn’t rise in September mostly because of whats happening in private sector employment, we just don’t know what, and I was thinking alound as to what could conceivably be happening.
Looking at US data, the fact that unemployment lags a general recovery isn’t an age-old phenomenon. After almost every recession since 1960, unemployment started to drop only one or two months after the recovery started. But that changed after the recession ending in 1991, after which there was a 15-month lag. After the recession of 2001, the lag was 19 months.
As such, our experience with lagging unemployment is not an iron law of economics, and it could be shorter this time.
A few weeks ago (Sep 9), I predicted on this site that the recession (as defined by GDP) would end in 2009 Q3. I predicted that GDP would rise in 2009 Q3 over Q2. All year, I have also repeatedly challenged the wildly over-pessimistc (as I saw them) estimates/forecasts being made at the time for the fall in GDP in 2009 and 2010, net emigration and peak unemployment (probably to the point of excruciating boredom for those reading my posts). My post (Sep 9) was considered so wildly optimistic at the time that, a couple of days later (Sep 11), one of the distinguished moderators of this site, Gregory Connor, opened a thread (link below) to discuss my prediction.
http://www.irisheconomy.ie/index.php/2009/09/11/first-swallow-of-spring-in-ireland/
In the past two weeks, the following have occurred:
(a) On Sep 22, CSO statistics showed net emigration of 7,800 in the year to 2009 Q2, a fraction of the figures being sensationally bandied about in the media prior to the publication of the CSO statistics. All of the 7,800 was accounted for by eastern Europeans returning home – there was zero net emigration among Irish nationals.
(b) On Sep 24, CSO statistics showed that the fall in GDP came to an end in 2009 Q2 – the change in GDP between 2009 Q2 and 2009 Q3 was precisely 0.0%.
(c) On Sep 29, the economic forecasters, Davy, totally revised their economic forecasts for 2010 and 2010. They revised their forecast for GNP growth in 2010 from -3.0% to +0.5%, and they forecast GNP growth of +4.0% in 2011.
(d) Today, CSO statistics show that the increase in unemployment has slowed to a trickle (up just 600 in September) – as a result, most economic forecasters have revised their forecasts for peak unemployment from 17.0% to around 13.0%, with most now predicting it will start to fall in 2011.
In retrospect, it is now clear that I was correct to challenge the prevailing pessimism. It is now very clear that, in the first half of 2009, the amount of pessimism about the economy, both short-term and long-term, was wildly overdone, both by sensationalising media economists and media commentators (of whom we should not expect better), and a number of the more mainstream economists (of whom we should expect better). To put it bluntly, in the first half of 2009, both these groups over-egged the recession pudding. In the process, they damaged Ireland’s economic reputation abroad and economic confidence at home. They should apologise. As far I can see, the only mainstream economist who has called it correctly is Ronnie O’Toole.
Oops, in my last post, in para (b), it should have said: “the change in GDP between 2009 Q1 and 2009 Q2 was precisely 0.0%.”
And, in case anyone is confused by the apparent inconsistency of John’s posts, there is obviously more than one ‘John’ posting here. Common-as-muck name, I suppose.
@ one of the Johns
I think asking for an apology is a little OTT.
many commentators on this site have become swept up in a wave of pessimism and lost their objectivity. They are now using tortured reasoning to explain away positive indicators which aren’t consistent with their negative viewpoint.
Just because Morgan Kelly was right about the housing market doesn’t mean he’s right about everything. I was very surprised by some of the inaccuracies in one of his recent articles.
When things are good, it always seems like they’re going to be good forever and I think the same mindset kicks in when times are bad.
@both Johns
Perhaps one of you could call yourself John the Pessimist and the other John the Optimist.
@Con
“When things are good, it always seems like they’re going to be good forever and I think the same mindset kicks in when times are bad2
That’s exactly how it works – it is never as good as we are being told nor is it as bad as predicted. In between is presumably boring. I take both with a pinch of salt.
There are certainly several pieces of decent news emerging over the past few weeks. Won’t make me rush out and do anything rash but hopefully we’ve hit bottom. A few questions we need to see play out before we can assume growth at Davy’s 4%:
1. Effect of continued emigration of non nationals – it’ll keep the lid on unemployment but won’t do much for consumer spending and the rental market.
2. Effect of the cut in government expenditure in the coming budget.
3. NAMA on credit flows.
4. Interest rate movements – will they be aligned to Irish needs.
Recovery needs to be nurtured, I just hope we have the right people to do it.
@ Ronnie,
The point I was making isn’t that there is a New Deal going on here with Public Sector employment or anything – you are right that to March there has been a decline.
The point is that the “green shoots” (oh I hate that term!) people are seeing in UE is mostly down to this anomalistic surge in PS employment since March.
My point is that we will see the bottom when construction employment bottoms out. But don’t look for growth until something happens to restore NACE B-E competitiveness.
I still think we are being foolish if we just look at the Live Register figures, and think things are picking up. There are something in the region of 6,000 people every month this year being made redundant – does anyone really think they are getting jobs?
@Graham,
My point is that the scale of public service numbers couldn’t possibly explain this. The live register is around 60,000-70,000 or so better than the Government had anticipated in April. This is of a scale that couldn’t possibly be explained by public sector employment. As for the QNHS data, public services sectors are back to where they were 6 months ago, so no growth.
All of this from a fairly innocent (and perfectly sensible) comment from Karl that fiscal retrenchment will slow the economy. The screamingly obvious explanation is what is happening here tells us something about the private sector labour market. If it walks like a duck…..
To further bolster my point, if you look at employment growth outside of sectors O and Q you get this
Q108 -0.01%
Q208 -0.66%
Q308 -0.54%
Q408 -3.41%
Q109 -4.74%
0209 -2.11%
Hardly the stuff of green shoots.
@Ronnie,
Okay, I accept your point.
@Stuart, I think that employment that is (or appears to be) Government-influenced was the big story of the Q2 QNHS data. I suspect it may still be there in Q3, but I expect that there will be at least one other big story too.
My guess is construction, as loss of construction employment, and multipliers on this loss, have been the dominant factors driving employment down and unemployment up. If the 1980s are anything to go by, construction industry employment will bottom out at 5% to 6% of all employment without major Government support. Now that we have hit 8% (as of Q2), I’m inclined to think that the decline will slow even without any major Government intervention, and that a substantial programme of infrastructural investment could bring the fall in employment in this area to a fairly rapid halt. I’ll be very interested to see how things pan out.
Is the fall in the number of persons on the Live Register a positive sign?
We need to be careful in interpreting the stats. First, almost all (-15,691) of the decrease in the numbers signing-on in September was a result of a fall in the number of persons in receipt of Job Seekers Benefit. The monthly decrease in the number claiming this insurance based payment could be due to: (i) people getting jobs and signing-off (I’m not so sure about this); (ii) a sharp fall-off in redundancies and hence the number of new people signing on for Job Seekers Benefit (possibly something going on here); (iii) an increased take up of places on education and training programmes due to time of year (likely to be an influence); or, (iv) the exhaustion of entitlement to Job Seekers Benefit and non-entitlement to Job Seekers Allowance which is a means tested payment (data on this would be really useful). The latter could come about in the case of couples where one person still remains an income earner. Bits of all four possibilities could be at play.
As there is limited evidence of change in the number of recipients of Job Seekers Allowance this would point to increases in the duration of claims for this payment. If so, we have an undercurrent of rising long-term unemployment. As noted by the OECD in their review of Ireland’s labour market policies in 2008 – “A critical issue for Ireland’s social and economic future is whether the labour market will experience a full cyclical recovery or return to the persistently depressed conditions of the 1980s and 1990s” (Activation Policies in Ireland – 2008).
There were 39,000 housing units completed in 1997 and the emplyment level was 133K at the end of 1997.
It’s now back to about 155,00 and housing has generally accounted for about 2/3 of construction output.
The recovery is going to be rocky as evidenced by some US data this week.
The danger is that politicians will use some positive signals to delay tackling the public finances.
This is only the fire fighting aspect of responding to the crash.
What is striking is that reform of a failed system is not on any agenda.
It was in Jan 2007 that Bertie Ahern requested the OECD to review the public service a propose changes; a “task force” is continuing to review the review.
Whatever interpretation is put on the Live Register figures, it is now clear that the consensus forecasts for GDP growth in Ireland in 2009 and 2010 are going to be out by a Guinness Book of Records-type margin. And, as will soon become apparent to all, the public have been sold a largely fictitious account of Ireland’s economic performance during the global recession by the media.
For the past year we have been told ad nauseum two things:
(a) The fall in GDP in Ireland between 2007 and 2010 was going to be the LARGEST FALL in economic output EVER RECORDED in a developed country. Even Brian Lenihan said that on his St. Patrick’s Day trip to London. The consensus forecasts were for a fall in GDP of 3% in 2008, 9% in 2009 and 3% in 2010, giving a total fall in GDP over the 3-year period between 2007 and 2010 of 15%, of which 12% would occur between 2008 and 2010. The 2008 fall of 3% was allready known when the forecasts were made, so let’s focus on the predicted 12% fall in GDP between 2008 and 2010.
(b) Ireland was experiencing the deepest recession of any EU country and would be among the last to recover.
It is now clear that neither of these are true, or even close to being true.
GROWTH IN GDP BETWEEN 2008 AND 2010:
As I said above, the consensus forecasts all year for GDP growth between 2008 and 2010 have been -12% (-9% in 2009, -3% in 2012). So, let’s see how its working out, based on the known figures for GDP growth up to 2009 Q2. Let’s assume 3 different scenarios:
(a) PESSIMISTIC – for this, assume:
—-zero average GDP growth each quarter from 2009 Q3 to 2010 Q4 – this
—-would mean that the economy did no better from 2009 Q3 to 2010 Q4
—-than it did in 2009 Q2, despite the fact the all indications are that the
—-global economy will pick up in that time
in this scenario, the fall in GDP between 2008 and 2010 is only 6.7%
(b) REALISTIC – for this, assume:
—-0.5% average GDP growth each quarter from 2009 Q3 to 2010 Q4 – this
—-roughly corresponds to the Davy forecast published yesterday
in this scenario, the fall in GDP between 2008 and 2010 is only 4.6%
(c) OPTIMISTIC – for this, assume:
—-1.0% average GDP growth each quarter from 2009 Q3 to 2010 Q4 – in —–their forecast published yesterday Davy implicitly forecast that
—-quarterly GDP growth would hit 1% in 2010 H2 – so, for this scenario,
—-the optimistic assumption is that the economy starts growing at this
—-rate in 2009 H2 rather than 2010 H2
in this scenario, the fall in GDP between 2008 and 2010 is only 2.5%
So, clearly, unless there is a severe double-dip global recession, the fall in GDP in Ireland between 2008 and 2010 is not going to be even close to the
predicted 12%. Its much more likely to be in the range 2.5% (optimistic) to 6.7% (pessimistic), with a figure somewhere in the middle of that range (perhaps 4.6%) being the most likely. And, of course, as we know that the fall in GDP in 2008 was 3.0%, it follows that the fall in GDP between 2007 and 2010 is not going to be even close to the predicted 15%. Its much more likely to be in the range 5.5% (optimistic) to 9.7% (pessimistic), with a figure somewhere in the middle of that range (perhaps 7.6%) being the most likely.
COMPARISON WITH OTHER EU COUNTRIES:
The first table is for:
the change in the volume of GDP between 2008 Q2 and 2009 Q2:
Poland +1.4%
Greece -0.3%
Cyprus -0.7%
France -2.8%
Malta -3.0%
Belgium -3.7%
Portugal -3.7%
Spain -4.2%
Austria -4.5%
Netherlands -4.9%
Slovakia -5.4%
U. Kingdom -5.5%
Czech Rep. -5.5%
Germany -5.9%
Italy -6.0%
Sweden -6.1%
Denmark -6.4%
Luxembourg -6.6%
IRELAND -7.3%
Hungary -7.4%
Romania -8.3%
Finland -8.9%
Slovenia -9.0%
Estonia -15.8%
Latvia -17.3%
Lithuania -20.4%
So, in the year to 2009 Q2, seven countries in the EU had falls in GDP that were greater than Ireland. However, this only tells half the story. What is equally important is the trend. So, I have divided the period between 2007 Q2 and 2008 Q2 into two sub-periods: (a) between 2008 Q2 and 2008 Q4 (b) between 2008 Q4 and 2009 Q2.
The second table is for:
the change in the volume of GDP between 2008 Q2 and 2008 Q4:
Slovakia +4.0%
Greece +0.7%
Poland +0.6%
Cyprus +0.3%
Czech Rep. -0.8%
Malta -1.0%
Austria -1.3%
Netherlands -1.4%
Spain -1.6%
Belgium -1.7%
France -1.7%
Lithuania -1.7%
Portugal -2.3%
U. Kingdom -2.5%
Denmark -2.8%
Germany -2.8%
Italy -2.8%
Hungary -2.8%
Romania -2.8%
Slovenia -3.4%
Finland -3.6%
Luxembourg -4.2%
IRELAND -5.1%
Sweden -5.4%
Latvia -6.4%
Estonia -7.3%
The third table is for:
the change in the volume of GDP between 2008 Q4 and 2009 Q2:
Poland +0.8%
Sweden -0.8%
Greece -1.0%
Cyprus -1.0%
France -1.1%
Portugal -1.5%
Belgium -2.0%
Malta -2.0%
IRELAND -2.3%
Luxembourg -2.5%
Spain -2.6%
U. Kingdom -3.0%
Austria -3.2%
Germany -3.2%
Italy -3.2%
Netherlands -3.5%
Denmark -3.7%
Hungary -4.6%
Czech Rep. -4.7%
Finland -5.5%
Romania -5.7%
Slovenia -5.8%
Slovakia -9.0%
Estonia -9.2%
Latvia -11.7%
Lithuania -19.0%
As can be seen, between 2008 Q2 and 2008 Q4, Ireland was near the bottom of the league table, but between 2008 Q4 and 2009 Q2, Ireland moved back up towards the top of the league table. My interpretation of these figures is as follows:
(a) In the first phase of the global recession, i.e. up to the end of 2008, the sector globally that was hit most was construction. Manufacturing and exports globally were hardly affected at all until near the end of 2008. During this (first) phase of the global recession, Ireland recorded a well above-average fall in GDP, both because construction was/is a larger share of the GDP in Ireland than in most other countries, although not as large as some economists claim, and because the fall in construction output in Ireland was much larger than in most other countries.
(b) In the second phase of the global recession, i.e. since the beginning of 2009, the sectors globally that have been hit most are manufacturing and exports, while the fall in construction output has been bottoming out. So, since the beginning of 2009, manufacturing and exports have taken over from construction as the drivers of the global recession. As has been pointed out frequently here, the falls in manufacturing output and exports in Ireland in 2009 have been far less than in any other EU country, This, combined with the bottoming-out of construction output, is resulting in Ireland having a well below-average fall in GDP during this (second) phase of the global recession.
In terms of the y-o-y falls in GDP (first table), Ireland is still deep in the bottom half of the EU league table. But, that is because that period includes both the period 2008 Q2 to 2008 Q4 AND the period 2008 Q4 to 2009 Q2. As we move through 2009, the 2008 Q2 to 2008 Q4 period will drop out of the y-o-y figures. Based on the trend shown in the first two quarters of 2009, there is every reason to expect that, by 2009 Q4 and into 2010, Ireland will be recording among the smallest y-o-y falls in GDP, and may well be among the first to start recording y-o-y rises in GDP.
Oops, apologies, another typo (trying to post here while watching Man U. Should be: (-9% in 2009, -3% in 2010) – not (-9% in 2009, -3% in 2012).
@John
I think it is still fairly optimistic to say that the average quarterly will be 0% over the next 7 quarters.
That should have been
“I think it is still fairly optimistic to say that the average quarterly growth will be 0% over the next 7 quarters.”
I would also add that the government through borrowing is effectively providing a 10%+ stimulus to the economy through borrowing.
As this is cut back, which it has to be, that stimulus will be removed from the economy.
@John
According to Eurostat, the fall since peak (Q1 07) in Irish GDP (to Q2 09) was 10.5%, exceeded in the EU only by Lithuania, Latvia and Estonia (around 20% each). The fall in GNP since peak (Q3 07) in Ireland was 13.6%. It is important to allow for the fact that the peaks differed in the different countries – most peaked 3 or 4 quarters later than us.
For the EU 27, the fall from peak (Q1 08) in real GDP to Q2 09 is 5%. For the six largest EU countries, the falls from peak are: UK, 5.5%, Poland zero, Italy 6.5%, Spain 4.2%, France 3.3% and Germany 6.4%. I don’t see how it is misleading to describe the Irish recession as unusually deep. What happens next is anyone’s guess, of course.
@ John
It is indeed a pleasure to read your posts. Like other self employed most of us take little notice of the crap in the media about the economy. We now have economic experts ranging from failed politicians and business owners,and “losers” generally. I loved Michael O’Leary’s recent go at “Losers” Ganley, the Shinners and whingeing Higgins on the Lisbon Treaty. Despite what may be written by the naysayer contributors the Private Sector across the board has been busting their guts trying to manage this recession and it is starting to get sorted with the exception of the construction sector which has a long way to go.This is being done in a background of abysmal Political Leadership and a Banking system in crisis. For the first time in a year our bank account has started to run in credit which is due to better credit management and activity. The phones are starting to ring more often again. Customers are starting to talk about new projects. We are not yet looking at increasing employment but maybe we may not have to fire highly regarded and talented staff. Friday for me is a key determinant of what type of future we want to have in this country. Keep up the analysis John it cheers me up………
Whooopeee!
It’s all over!
Not. The debt levels and credit destruction is all still there. Please let’s not lower the intellectual content by waving wet kn&&&ers in the air? It is only human to want things to get back to normal. But there is a new normal. Tone it down, huh?
Wonks get excited by stats, I get it. But the fun da mentals is all wrong. And you all know it.
The stabilisation of the unemployment figures is good news. How many more months of 10,000 people joining the welfare could the country have survived.
One area that seems to have slipped uder the radar of the analysis on the economy is the weakness of the UK pound.
We spend so much time discussing the effect of the US economy on Irish prospects but very little on our major trading partner which is the UK.
Will our recovery be hampered by the weakness of sterling ?
The UK also tends to be the first port of call for our unemployed and a prolonged recession there could have a big impact on the economy here.
I would be interested in a thread on sterling if possible.
@ Pat
no offence, but having just read your overnight ramblings about the US “endless war” machine on one of the other threads, i don’t think anyone here is “lowering the intellectual content” in relative terms. People generally read your posts with an open mind, so maybe you might do them the same courtesy?
@ Frank
the value of Sterling is hugely important for the SME export sector, and i know first hand that a lot of them are really struggling with the adjustment that EUR/GBP’s surge has caused them over the last year. 90p seems to be the line dividing profitable from loss-making operations for their exports at the moment.
@Frank,
Excellent point on Sterling, Frank. And equally, will a recovery in the continental euro area present threats in terms of tighter monetary policy? That has been discussed, but to what extent is it actually taken into account in the determination of policy? There seems to be a hand-in-the-air attitude concerning such external factors.
We cannot control them, but at least we should plan for them.
@John
Optimism is great but we have to look at the current deficit.
A problem that we are only starting to tackle and the pain from which, will grow and grow for 5 years and that is if it all works out well.
Initiallly thought to be about 20 billion it is more likely the current Deficit will be between 25-30 billion for this year.
So by right this means we need to have 5 billion cuts this year rather than 4 unless we increase taxes again.
Then we need a similar size cut for the next year and so on for five years
So in two years time our economy will have been cut by 10 billion from where it is presently, in three years 15 and so on.
All the while we will be adding 25 billion to our national debt this year, 20 next year 15 the year after 10 the year after and 5.
So all going well our national debt will have increased by 75 Billion in 5 years.
Then we have the likely problem of increasing interest rates.
I consider myself left of centre but the mathmatics are very very stark and the resistance against the required cuts from the Public and Unions will be very very dangerous.
The public sector say they did not share in the exuberance of the Celtic tiger and therefore should not now have to pay for it.
I am afraid that is not true, Every time that the government gave Unions the pay increases and extra employees they desired because they were under the misconception that they could afford it, the public sector were sharing the spoils of the celtic tiger in a latent way.
I remember nurses going on strike in Ireland a few years ago because they wanted a 15% increase in wages and the government only wanted to give 10%. At the Same time nurses in the UK were going on strike because they wanted 2% and were only being offered 1%.
Everyone, including those in the public sector, especially at the higher levels (both pulic and private) lost a grip on reality. That’s what happens in a bubble.
I think the only way the country can avoid bankrupting itself is if the government convinces the higher paid Public servants to take large salary reductions and then slightly lower ones as peoples salaries get smaller.
They must also try to get buy in from Private sector unions representing well paid workers to take part.
The Cuts have to start from the top down to give union leaders any chance of appeasing the larger numbers of people who earn less.
I genuinly think if a big gesture was made/ forced on the elite in Irish society the unions would make an effort to appease their members. They would have to except the bona fides of the government in tackling the magnitude of the problems we are in.
The 3.5% pay claim is insane and the Unions know this, however they have to be seen to support their members in the absence of a genuine top down effort of solidarity in the society.
Far from the economic recovery John the optimist sees, I see a problem of the magnatude that it is looking un-get-out-able. Large scale industrial unrest could push us over the edge.
@Colm McCarthy
The point I was trying to make, in relation to hopelessly inaccurate GDP forecasts, related to their y-o-y forecasts. In fact, these are the only forecasts most forecasting organisations (like ESRI, Davy, IMF etc) make. Hardly any of them make quarterly forecasts. That these y-o-y forecasts are indeed turning out to be hopelessly inaccurate can be gleamed from a document published by DKM on Sep 20 (link below), in which they give a list of then current forecasts for GDP growth in 2009 and 2010 by 15 of the leading forecasting organisations. Its on page 2 of the document.
http://www.dkm.ie/uploads/economy_watch/Economy%20Watch%20September%202009.pdf
The fall in GDP between 2008 and 2010 forecast by each of the forecasting organisations at that time (i.e. just 2 weeks ago) was as follows:
BOI -7.0%
NIB -8.0%
ESRI -10.2%
Davy -10.5%
Dept Finance -10.6%
Bloxham -10.8%
Ulster Bank -10.8%
Central Bank -11.0%
NCB -11.2%
IBEC -11.3%
OECD -11.3%
IMF -11.5%
EU Commission -11.6%
AIB -12.0%
Goodbody -13.1%
But, as I showed in my earlier post, its now far more likely that the fall in GDP between 2009 and 2011 will be in the range 2.5% to 6.7%, with a probability that it will be in the middle of this range, i.e. about 4.6%. It looks like the only ones who came close were the much-maligned Dan Mclaughlin (BOI) and Ronnie O’Toole (NIB), who posts here. And, I’m now not the only one who is of that opinion. One of the organisations in the above list, Davy, last night revised their forecast fall in GDP between 2009 and 2011 from -10.5% (as in above list) to just -5.2%. I expect that all the others will soon follow suit.
Pointing all this out isn’t just an academic exercise. These wildly inaccurate forecasts have been repeated across the world’s media as evidence that the Irish economy was in total meltdown, when clearly it wasn’t. That has damaged confidence in the economy, both among consumers at home and investors abroad. In addition, such wildly over-pessimistic and inaccurate forecasts may well have affected Ireland’s credit rating and the yield on Irish government bonds.
In fairness, all of the above forecasters seem like Nostradamus, when compared to Morgan Kelly. Earlier this year, he gave an interview to the New York Times (link below), in which he predicted that the Irish economy would ‘vapourise’ in 2009 and 2010, and that the fall in GDP between 2008 and 2010 would be 20%. Its now clear that this was one of the worst forecasts ever made by an economist. It must have done untold damage to Ireland’s economic reputation and foreign investors’ confidence in the IRish economy. I don’t see that paying academics to damage the economy in this way is a sensible use of taxpayers’ money. If the Government is looking for cuts that actually benefit the economy, his salary should be high on the list.
http://tremendousnews.com/2009/03/01/irelands-economy-almost-in-the-shitter/
@John
Your are critising other economists forecasts based on your own. Time will tell who is correct.
But personally I think your pessimistic forecast is very optimistic.
How many times do I have to ask for people to forget about GDP and talk about GNP?
GDP flatters to deceive.
GNP is a far better insight into the real economy.
And I am only an engineer.
I would certainly like to see Morgan Kelly’s response to John’s arguments above – anybody care to contact him?
@Dreaded_estate
As I said in the third paragraph from the end, one of the main forecasters, Davy, whose forecast in the DKM list I attacked (-10.5% fall in GDP between 2008 and 2010), yesterday revised their forecast to a -5.2% fall in GDP between 2008 and 2010, which is pretty close to my own. I will be interested in how the other forecasters revise their forecasts in coming weeks, particularily ESRI, whose forecasts are usually quite similar to Davy’s, but who are considered the most authoritative and whose forecasts receive the most publicity in the media.
But, you are quite correct. Only time will tell.
Although I think we can safely say at this stage that Morgan Kelly has made one of the worst economic forecasts of all time and has damaged the country’s economic reputation in the international media in the process.
Anyone have a photo of Mr. Kelly to hand for effigy-making purposes? 🙂
@john the pessimist “There are something in the region of 6,000 people every month this year being made redundant – does anyone really think they are getting jobs?”.
I know that they aren’t. Having looked for a long time now, all day every day, they just aren’t there.
I also know that a lot of people, like myself, have gone back to college this year in desperation (I’ve gone back to do a masters in a totally different field in the hope it gives me some other options). I know this because I’m meeting them every day. I presume that we no longer figure on the unemployment register even though we actually are?
Always the man, and, not the ball!!
@ John
Can you tell me how to fire incompetent academics in Ireland ?? They go on about the Bankers ad nauseam but conveniently forget their own.
http://www.nakedcapitalism.com/2009/10/the-recession-is-over-but-the-depression-has-just-begun.html
A useful analysis. Sadly likely to be true. Are we running out of bubbles? That is inevitable. Looks like Dreaded Estate has been hopelessly optimistic.
This started about the surpringly good live register figures, which I was wondering was a sign that globally unemployment may not lag the end of the recession to the same extent as in 1991 and 2001. This today from a Danish daily:
Surprisingly positive (Danish) unemployment figures
From July to August the unemployment rose by 700 persons and thus remained on an unemployment rate of 3.7%. The total number of full-time unemployed persons in August was thus 103,700. Jyske Bank and Nordea had expected an unemployment of 4% and 3.8% respectively. Data from Statistics Denmark show that this is the third month running that the unemployment rate is 3.7% of the labour force.
Unemployment reached its lowest level in modern history in June 2008 with 45,900 full-time unemployed persons, seasonally adjusted. Since then it has increased by 57,800, corresponding to 126%. On average, there have been 4,100 new unemployed persons each month.
The better than expected development of the unemployment figures is, however, influenced by increased re-training initiatives. Furthermore, the unemployment figures for August are affected by some uncertainty, among other things due to changes in people’s holiday patterns.
@Eamonn Moran
The latest available poll of Irish economists by Reuters shows the median deficit forecast of €22bn. What are you basing your €25-€30bn estimate on?
@ Ronnie
probably the same figures the ’46’ based theirs on when they deicded they needed a snappy headline for their last opinion piece in the IT…
What started as a discussion on projections for unemployment has got off-topic into forecasts on GDP, defits, etc.
Back on-topic I see the latest IMF projection for Irish unemployment is for an increase from 12% in 2009 to 15.5% in 2010.
Something to chew on and clearly going in the opposite direction to the prominent insistent voices on this thread.
@Eoin
It all depends on what definition of the deficit you use. And more precisely how you treat the money “invested” in Anglo.
If you think we are likely to get this “investment” back then the real deficit is €4bn lower at €22bn.
If you think we are just throwing money in a black hole then the real deficit is €26bn.
…. and I forgot to mention that large number of people I also know who are leaving the country.
@Ronnie O’Toole – you used the word “suprisingly” a couple of times in an earlier post. I think they are surprising alright and a bit suspect. My view is that we are still in line for a double dip when governments stop throwing money at economic problems (because they can no longer afford to) – I was just looking at what happened to the US car market post the cash for clunkers programme – http://www.irishtimes.com/newspaper/breaking/2009/1002/breaking28.htm
@Ronnie
I’ve long had a sneaky admiration for the Danish and how they manage their economy. They are a small country beside a large neighbour, they stayed out of the Euro. They have some world class brands. If they’ve managed to keep unemployment to under 4% in this climate that is pretty good.
I do believe we can learn from them.
@Joseph
I do get the impression people are a little more optimistic at the moment and some businesses I have been involved with have had better months. But I agree the “shoots” are fragile. A double dip would be terrible for confidence. Hopefully we see a yes vote today, NAMA passed (just to remove the uncertainty over credit) and a well thought through budget.
The September figures for the numbers on the Live Register by nationality were published today. They don’t seem to support claims that the fall in the number on the LR in September was due to an increase in the number of foreign nationals going home. The number of Irish nationals on the LR fell by 4.1% in September, while the number of foreign nationals fell by 2.3%
@Cillian
Because it is a large international organisation publishing forecasts for lots of countries, the IMF forecasts are out-of-date. They were probably compiled weeks ago. Since the much better-than-expected GDP and Live Register figures were published only in the past week, the only organisation to publish revised forecasts that took these into account was Davy Stockbrokers. They published their revised forecasts on Wednesday. As I said above, they drastically revised down their forecast for the fall in GDP between 2008 and 2010, and they also revised down their forecast for peak unemployment to 13.5%. I’ll be amazed if the other Irish forecasting organisations don’t similarily revise their forecasts in the next few weeks.
@Stuart
You are an expert on retail. Do you know much about stock levels and when they might bottom out?
I had another look at the Q2 GDP figures today. I noticed something that few in the media or here have have commented on. In Q2, nearly everything was up on Q1. Consumer spending was up 0.5%, investment was up 5.7%, exports were up 0.2%. The only reason Ireland was not officially out of recession in Q2 was that stock levels fell by 1.1% of GDP. This follows falls in stock levels of 1.4% of GDP in Q1 and 1.3% in 2008 Q4. Such a run of falls in stock levels is unprecedented. Clearly, it must end sometime before too long, otherwise the shops will ressemble those in Bucharest before the fall of Caesescu, and there will be food riots. Any idea when stock levels in retail will stop falling. When it occurs, and stock levels rise again, there will be a large one-off increase in GDP over on top of whatever actual growth in GDP is occurring.
@Ray
Thanks for the compliments. I’m delighted your business is starting to pick up. Its because of the hard work of people like you that the economy is coming out of the recession much sooner and in much better shape than most economists forecast. Its just a shame that hard-working people like you have to pay part of their taxes to support academics like Morgan Kelly, who spends most of his time bad-mouthing the economy to the world’s media, damaging it in the process. And, while I don’t know anything about sacking him, take comfort from the fact that, the harder you and people like you work, the more foolish MK’s forecast of a 20% fall in GDP is going to look in a year’s time.
@ John
FYI – NCB’s current (as of this afternoon) GDP forecasts are now -6.7% in 2009 and -0.3% in 2010. Not sure if you’re aware of them as they’ve only re-done the numbers this week. Some good analysis from you, keep it up.
@Eoin
Thanks for that, Eoin. I didn’t know. So, they’ve reduced their forecast fall in GDP between 2008 and 2010 from -11.2% (in the DKM survey) to just -7.0% now. A similar pattern to Davy. ESRI is the big one I’m waiting for. Their’s usually gets massive publicity in the media. RTE and the Irish Times usually lead with it. I think it will be due in the next week or two. I will be very surprised if they don’t follow suit.
Now that the Irish economy is coming off its bottom, it is time Brian Cowen and Brian Lenihan came off their bottoms, and started highlighting all this and engendering some economic confidence. This time tomorrow, they’ll be addressing the world’s media at the ‘Yes victory’ press conference (at least, I hope it will be a ‘Yes victory’ press conference). That would be an ideal opprtunity to inform the world’s media that, like Mark Twain’s, the death of the Irish economy has been greatly exaggerated. I’m not one for painting a falsely rosy picture or just tring to talk the economy up for the sake of it. But, they need to realise that engendering confidence in the economy (both among consumers in Ireland and investors aboad) is a key element in any recovery. And, highlighting to the world’d media that all the economic forecasters are now dramatically revising up their forecasts for GDP growth in Ireland would certainly help in that respect. So, over to you, Brian and Brian.
@John
“You are an expert on retail. Do you know much about stock levels and when they might bottom out?”
I know several SMEs who are generating cash purely by reducing stocks. In the end a business (and by extension the owners and their families) survives based on generating cash. In the good days this was an area that was overlooked – slow moving stock was ignored. I’m advising several businesses and one part is to turn old stock into cash (even if they make an accounting loss – it is money in the bank).
When does it stop? Depends how high stocks went. Last Christmas was a bad one for retailers, probably the first serious hit of this recession. This year’s purchasing will reflect that and I would expect to see imports down (as we have seen for much of the year). But you’re right, at some stage the tide turns, stocks get too low and retailers start buying again.
I agree confidence plays a big part in recovery but if you overplay this too early and there is another dip it will be all the harder to get it back. I would prefer to see how the next quarter plays out in terms of unemployment, tax take and retail spending. The two Brians also have the opportunity to make a complete mess of the budget!! If we get to 31 December in reasonable shape then let’s sell the recovery story in 2010.