Bad News from the QNHS

Yesterday’s QNHS report paints a picture of a very depressed labour market. The seasonally adjusted unemployment rate for the fourth quarter of 2009 was 13.1%.

It is perhaps worth reminding readers of how the unemployment rate is measured in Ireland. The QNHS, a large nationally representative survey, provides the official measure of the unemployment rate. The survey asks questions to assess whether the person is really participating in the labour force and then, if this is the case, whether they are in employment. So the survey provides measures of both the labour force participation rate and the unemployment rate. 

The QNHS takes some time to process, so it’s release is not very timely. For this reason, the CSO also publishes a “seasonally adjusted standardised unemployment rate” which extrapolates from the most recent QNHS data using Live Register figures on the number of people claiming benefits. Sometime this extrapolation is accurate, sometimes it’s not.

In the case of 2009:Q4, the extrapolation was not accurate. The most recent Live Register release, reported standardised unemployment rates of 12.4 in October, 12.4 in November and 12.5 in December. These data had suggested that the unemployment rate was flattening out. However, the QNHS now reports that the seasonally adjusted unemployment rate rose from 12.5% in 2009:Q3 to 13.1% in 2009:Q4.  

The most recent Live Register release reported an unemployment rate of 12.6% in February. A simple extrapolation from the QNHS release would suggest that this would be revised up to 13.3%.  Overall, the picture has changed somewhat from one in which the unemployment rate appeared to be flattening to one where it still seems to be rising.

A noteworthy feature of the QNHS data is that the increase in the unemployment rate is occurring despite a significant decline in the participation rate. This rate has dropped from 64.1% in 2007:Q4 to 61.5%. For comparison the decline in participation in the UK and US over roughly the same periods has been about one percentage point. So this is an extra 2.5% of the labour force that is no longer counted as unemployed because they are not looking for work.

Perhaps surprisingly, the decline in participation has been most concentrated amongst men. The male participation rate has declined from 73.5% in 2007:Q4 to 69.7% in 2009:Q4 while the comparable decline for females has been from 54.7% to 53.5%. One possible explanation has been the concentration of job losses in the construction sector. Very few women worked in the construction sector, while male construction employment has declined from a peak of 263,000 in 2007:Q2 to 122,000 in 2009:Q4. The decline in male participation may reflect discouraged former construction workers leaving the labour force.

The male unemployment rate, which prior to the recession was similar to the female rate, has risen from 4.8% in 2007:Q3 to 16.6% in 2009:Q4. The comparable rise in the female unemployment rate has been from 4.0% to 9.0%.

Finally, the data show that long-term unemployment is becoming a more important factor. The QNHS shows that by 2009:Q4, one third of the unemployed had been out of work for more than a year; this share was up from one-fifth at the start of the year.

28 thoughts on “Bad News from the QNHS”

  1. The divergence (or convergence!) between the QNHS and the live register would indicate that there is an effort to reduce the SW bill. The unemployment between Q3 and Q4 increased by 10,000 (SA) though the live register was virtually unchanged. This could be formal measures (reducing the length of jobseekers benefit for example) or through tighter administrative control and scrutiny. Though as you say Karl, very diappointing.

    In the absence of jto, I should point out that while Ireland has a higher unemployment rate than in Europe, and also has more employed!

    Ireland’s unemployment rate is now the second highest in the Eurozone behind Spain. However, despite the fall in the number of Irish people actively participating in the labour market, participation is still far higher than is typical in the rest of Europe.

    This is a product of the legacy of high unemployment in Europe over the last number of decades which has discouraged people from actively seeking work. As such, the number of people of working age who have jobs is 54% in Ireland and 52% in the Eurozone.

  2. “One possible explanation has been the concentration of job losses in the construction sector.”

    Would the decline in participation be partly due to courses and training that would be provided by FAS and the like?

    Anyone with the brains to posit a correlation between the construction unemployment rate and our national infrastructure lag in comparison to our EU partner nations?

    Al

  3. The increase in long-term unemployment should be a matter for concern & not just because of the consequences for the individuals themselves. The evidence generally points to the long term unemployed as generating less downward pressure on wages thus leading to labour market hysteresis. The “Economics of Doing Nothing” seems a particularly bad idea in this context. Some combination of reforms to active & passive labour market policies including reforms to the minimum wage would help here.

    Some references below:
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=648002
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=344826

  4. @KW,

    The most recent Live Register release reported an unemployment rate of 12.6% in February. A simple extrapolation from the QNHS release would suggest that this would be revised up to 13.3%. Overall, the picture has changed somewhat from one in which the unemployment rate appeared to be flattening to one where it still seems to be rising.

    Very useful analysis of how the figures are worked out etc. That is very, very helpful for many of us to understand. There are a lot of very useful observations in your blog entry above, too many for me to comment on. But when I read a paragraph like this, I think it makes sense. There are a lot of young graduates coming out of universities in Ireland at the moment, but to what exactly? If one can count a bloke with a degree or a masters, working at McDonalds as officially employed, well and good. But I would imagine, many are out of university, are actively searching for employment, and those people simple have to show up in the trend, of upward percentages. I read in security of oil supply report published by the DCENR, (communications, energy and natural resources) it would be ideal, if in the case of a global oil shock, that strategic reserves would be utilised to maintain business as usual for a period of up to 90 days. To try and restrain or ration supply of oil, was found upon analysis to be a poor strategy. Even a small restraint to commercial oil supplies could result in much damage to the economy of Ireland. (One has to view the national fleet of electric trucks, cars etc combined with natural wind electricity generating resources in this context of security of fuel supplies, and safeguards for the economy) I strikes me, that very decent reports on security of oil, gas, food supply etc have been looked at and/or published by the Greens in government. But we don’t seem to look at our economy and its money supply, in the same way as we do other essential raw materials. BOH.

  5. By coincidence, I noticed this story on the RTE web site right now. (I am far from being a greeny, weany myself. But there are sound economic reasons for going the wind direction in terms of energy, besides just clean energy) The problem with any of these energy projects, nuclear included, is who owns and manages them afterwards. A bit like our telecoms infrastructure I guess. It is ironic isn’t it, that Eddie O’Connor is blazing away today in the middle of a recession raising money. At one stage he worked at Bord na Mona. BOH.

    http://www.rte.ie/news/2010/0325/energy.html

  6. Even with the bad news that has been highlighted above, there is an important nugget of good news too. Employment in “Industry” was falling at about 10K per quarter, but it stopped falling, and rose marginally, in Q4. This is important, because it is where a lot of our export-focused jobs, that ultimately pay the bills of our Small Open Economy, are located.

    Construction still had not bottomed out as of Q4 (and I think it has further to go), but *if* employment in the exporting economy has actually bottomed that is a great sign.

  7. We should give the government credit where some is due.

    The number of part-time employed has increased almost 9% (33.4k) over the last 2 years to 419.5k.

    Though this is somewhat doubled-edged as it masks worse full-time figures in the overall numbers.

  8. Whether it’s good news, bad news or a bit of both depends on one’s perspective, but it looks as if the population aged 15-34 is down by about 14,000 (close to 1%) on the quarter.

  9. While Karl has focused on the unemployment rate, the absolute figures provide another take on where we are at. In round figures, the number in employment fell by 167,000 in the year to Q4 2009. During the same period unemployment rose by 98,000 and 69,000 people left the labour force. Clearly, unemployment would be higher if there was not such a high number of formerly employed withdrawing from the labour force.

    For me the really frightening figures are as follows: since employment peaked in Q3 2007 (at 2,150,000) a total of 262,000 jobs have been lost bringing total employment in Q4 2009 down to 1,888,000 (implications for lost taxes and increased expenditure). Now the implications: to bring employment back to pre-crisis levels over a five year period will require creating 52,400 net new jobs each year over the next five years. That is equivalent to just over 1,000 net new jobs a week for the next five years! Any views on the prospects or how it might be done?

  10. @Tom Ronayne,
    As per my initial post, a higher proportion of the 1,880k are part-time jobs. The full-time numbers are grim.

    @Con,
    My positive spin was tongue in cheek.

  11. So we’re heading back to the 1950s with a bolt-on, MNC-driven export platform (that will probably decline over time) and the Euro replacing Sterling. Economic activity shrinks to support a core of insiders in secure positions, emigration facilitates a managed decline and the principal challenge is to deal with a large underclass of outsiders characterised by long-term unemployment and by health, social and psychological problems.

    And, as in the ’50s, the shift in the age structure of the population and the disposition of economic and political power will prevent the conception, not to mind the implementation, of the political and economic reforms required.

  12. @ Tom Ronane,

    My eyes nearly popped out of my head when I read your comment 1000 jobs a week!!!! Creating this number of jobs a week sounds like science fiction. But it is a very good question you raise.

    I don’t wish this suggestion to come across as a Central Planning dogma but having listened to several people during the week a trend is present.

    There are several costs in having a job some of which are, transportation, parking, owning and operating a vehicle, if children are present in the family then child care costs are present etc etc.

    From listening to several lower civil servants on the radio during the week the cost of having a job barely covers the actual wages gained. In other words some people might be financially better off not to work.

    If a tax credit were to be given to two income families, whereby one parent were to give up their job for 5 years (5 years being an example only). This job could then be taken by another unemployed person. This might be more beneficial to all.

    1) the state saves in not having to pay unemployment benefit for the new worker.
    2) The person who has given up their job for 5 years (example only) can spend more time with their family and savings can be made from not having to run a second car, creche costs etc.
    3) The state will have to make a adjustment to the Tax individualization code so that the working parent can claim the allowances for the non working spouse etc.
    4) To make it more attractive the state may have to introduce other tax reliefs to make the scheme feasible for the person taking a indefinite career break etc.

    Don’t get me wrong I am not trying to impose a one size fits all strategy, obviously the above idea will not work in all cases. But if the ingredients in the mix could be made to work then the cost to the state might be reduced in the overall scheme of things, some families could face a higher quality of life due to one parent who is free, and other families could be financially better off due to a job secured etc.

    A another idea might be.

    Advances have taken place in computers and geology. Perhaps if old seismic data were to be reprocessed then mineral / oil / gas deposits may be present where none was thought to exist before. Ireland may have something under the ground which may be worth exploiting.

    If small deposits exist, it would be better for a small company be given the license to exploit the find. Large companies like Shell, BP, Exxon have operating costs far too high to be effective. Only a small lean minnow of a company would be effective. This is happening in the North Sea, where the larger companies are leaving and the smaller lower cost operators are moving in, reprocessing seismic data and tapping into small reservoirs which are unprofitable to larger players.

    These are just a few ideas….. no guarantee that they will work out.

  13. @All
    Their is a horrendous contrast between the government’s mania for bailing out bank investors and mega developers and for covering up the truth about the banking system collapse and their almost total disinterest in unemployment. We have already lost THIRTEEN THOUSAND MILLION on Anglo alone (4 by the government plus 9 of the 10 put in by the central bank). We are now about to lose another NINE THOUSAND MILLION. So we will have lost TWENTY TWO THOUSAND MILLION, 22,000,000,000 on Anglo with thousands of millions more to lose on the other banks. This madness must stop. The senior bondholders must share the losses (as they would do if it was wound up) and the subordinates must be totally wiped out. Compare their zeal to throw money to the banks with their cabinet committee on jobs which never met.

  14. @All

    From 1/5 to 1/3 in a year on long_term unemployment is a fairly devastating statistic … hysteresis and schelosis are back with a vengance, and looking worse than the 80s … heading to 50s … I suspect that the social_welfare/ed_training/enterprise systems lack capacity to cope adequately with this stat …….. devastating social consequences ….. and the 80s were never near_fully figured out re research/institutions/policy etc ……. in terms of policy now, we’re in big trouble here …….

  15. So the ILO classification of unemployed gives 267k for Q4 2009.

    And CSO Live Register gives unemployed 436k at Dec 2009

    The ILO definition of unemployment is (roughly) persons,

    (a) “without work” and
    (b) “currently available for work” and
    (c) “seeking work”

    I’m sure that this is a dumb question but do the CSO provide a reconciliation from ILO to Live Register?

  16. The ‘un-employment’ predicament will slowly become intractable. Very few ‘new’ employment opportunities will be created – credit is tuckered out, and the mass of overhanging debt is truly horrific. So its back to the farm lads. We are fortunate with our climate – just a pity about the badly polluted freshwater supplies and the over fertilized farmland.

    Our legislators are either ignorant, or hiding the reality from the sheeple. We’ll find out in due course. Anyone who thinks that BAU emigration is the option had better think again, and again, and again! The usual destinations are in hock as well.

    Chindian wages and SoL anyone?

    B Peter.

  17. Thanks for highlighting how data lags can present meaningful impediment to the design of responsive economic policies. An interesting example from the US of an attempt to improve the timeliness of data is provided by the Consumer Metrics Institute, “Bringing the measurements of critical economic activities into the twenty-first century by mining tracking data for an understanding of what American consumers were doing yesterday.”
    http://consumermetricsinstitute.com/

    Their results, as you can see appear ominous, and suggest a clear imbalances between the operating assumptions of government and many investors regarding the strength of recovery.

    From an Irish POV, is there anyway their methodologies could be applied in the Irish context, at least to understanding the situation in the domestic non-tradable portion of the economy? Could the ESRI be enticed to invest in a few grad students to investigate this?

  18. @ Mick Costigan,

    Good post, as always good to hear from that side of the pond. Just had a few scoops in Paddy Cullen’s outside the RDS, following a talk on energy security for Ireland, so I better not say much more. Cheers! BOH.

  19. “The most recent Live Register release reported an unemployment rate of 12.6% in February. A simple extrapolation from the QNHS release would suggest that this would be revised up to 13.3%.”

    Is this a reasonable extrapolation to make?

  20. Good post by KW. I was dismayed by these figures.

    They still don’t show how bad the situation really is.

    In addition to ‘those leaving the labour market’, there are many people moved onto courses and taken out of the stats one way or another and I know for a fact there are tons of under and (particularly) post graduates currently studying because they knew there was no point in going looking for a job.

    Talking to one post-grad programme of a couple of dozen people recently, other than three foreign nationals, every single one of them were there because they had been unable to find employment in the past year or so or had recently graduated and could see no point in going into the labour market so continued in education (and are lucky enough to have parents who can support them, in a couple of cases have part-time jobs as the support).

    Then there’s emmigration – destination countries may be in a similar boat but it doesn’t stop people going. I wonder what the real figures are for the past year? 50,000?

    Then there’s a large number of ‘one man company’/self-employed I know who haven’t worked in months (or more) or are simply surviving on their savings, hoping that things will improve before the savings run out.

    Then there are people like my wife. Made redundant last year. Spent 12 months looking for a job and receiving some benefits that lapsed after a year or so. Still couldn’t find a job so has gone onto teacher training but doesn’t get any benefits now or any kind of BTEA (back to education allowance) and no longer in the stats.

    The figures for the ‘unseen’ unemployed are a lot higher than most people think.

    But never mind. We have ‘turned the corner’ and are ‘past the worst’ so everything’s alright then.

  21. What happened with Murray O’Laoire is a shame. It should be noted that while they went out of business, their non-paying clients are still around. That should be a clear indicator of the risks involved when doing business in Ireland.

    Another example:
    http://www.independent.ie/national-news/tv-dragon-is-all-fired-up-over-8364180000-hes-still-owed-by-developer-2114883.html

    Simply put, under the current system it is too expensive and would take too long to enforce payment terms in Ireland. This is a problem that the government can and should deal with.

    If the problem is adressed, then there might be more people who would expand their businesses or even start businesses. It might not be as glamourous as other ideas, but it is definitely practical and achievable.

  22. “The QNHS shows that by 2009:Q4, one third of the unemployed had been out of work for more than a year.” That’s quite a stark figure.

    According to today’s Sunday Business Post, “a training programme aimed at getting the long-term unemployed back to work cost the state almost €890,000 per person, and did not lead to any of its participants getting a job.” That’s also quite a stark figure!

    http://www.sbpost.ie/news/failed-work-programme-cost-state-almost-900k-per-person-48270.html

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