Live register figures

How come the live register is ‘suddenly’ upto 14.7% when it was in the 13%’s last month? Does the QNHS adjust this? I know the live register is not the true reflection of unemployment yadee ya, O and can the last civil servant with a job bury the dead private sector as they retire on a non Irish life pension!

@Rich
“Does the QNHS adjust this?”
Yes. The QNHS is the definitive number. The unemployment rate is in the intervening months calculated according to the change in the live register. With some/many now dropping off unemployment benefit as they’ve exhausted their benefits, the live register adjustment method is falling into disarray somewhat. It’ll probably catch up with the next QNHS or two? And then it will probably overstate unemployment for a bit once the, um, corner is turned.

A house price scenario that is robust to the ‘What if Morgan Kelly is right?’ objection gives an answer that we don’t want. Therefore it cannot be entertained. What’s baffling about that?

The story on the cover if yesterday’s IT suggested that there were discussions with the Troika a to what parameters were to be used for the stress tests. This is disconcerting. What if they say they don’t want really adverse scenarios when the markets seem to be demanding same.

@ Eureka

“Compelling and inescapable logic”? You must be joking! The entire course of recent events tends to confirm the fact that the fate of the euro has been decoupled from that of the three peripheral countries in the most trouble. The new dispensation is best summed up in the change in name of the Competitiveness Pact to the Euro Plus Pact. This places the UK where it belongs: permanently outside the euro.

Were the euro to fail, there would be a flight back to the Dm which would cause the German economic boom to come to a shuddering halt and push the entire European continent into a prolonged recession. Even Cameron has admitted as much.

To relate the success of the Danish economy to not being in the euro is complete twaddle. The Danish crown is linked in lock-step to the euro as Denmark is at the ERM II stage. In other words, it has all the monetary policy disadvantages of a single currency without any of the practical advantages. In a country with a major international airport in the middle of Europe, it is hardly surprising that there is strong official support for the country to eventually revisit its referendum decision not to join. The same holds true for Sweden.

As to the UK? It is, as I said, where it belongs. The problem posed is whether Ireland is any longer where it belongs given the country’s degree of dependence on the UK market.

The stress test scenarios were developed at the start of January, so perhaps the Central Bank deserves some indulgence. It was just awful luck that the same day the CBI issued its stress test macroeconomic assumptions that the CSO dropped the bombshell on 14%+ unemployment. Also as Jto would say, it is notoriously difficult to forecast Irish quarterly GDP because of the global influences on MNCs’ exports.

The 14.7% unemployment rate is frightening and contrasts with Greece and Portugal at 11-13% though is thankfully still some ways off 20% in Spain. It would be reassuring to see the government acting on its first 100 days commitment to a strong jobs programme.

On a slightly separate subject does anyone know whose contribution to the bailout will be reduced tomorrow if the “final” cost is €20bn as seems widely expected. If it is €20bn then the headline bailout will drop from €85bn to €70bn but who will cut their contribution – EFSF/EFSM/bilaterals/IMF/NTMA&NPRF? Anyone know?

@BEB: I reckon this will easily bring the forecast losses into MK territory, though i doubt we’ll actually end up seeing such a cultural shift in attitude to debt.

My guess is you’re right, but arguably an adverse scenario should be based on the assumption that MK is right about prices and that you’re wrong about Irish attitudes to default. Walking away from debt becomes fashionable. Irish attitudes to lots of things have changed in recent decades so, while it’s certainly pessimistic to assume such a shift, it’s not outrageous gloom-mongering.

@zhou: surely it’s only sensible to consult the Troika? Lorenzo Bini-Smaghi accuses Ireland of undermining the last round of stress tests. At least deprive him of that line this time, by getting ECB input on the assumptions.

@Michael Hennigan

Better to be unemployed in Ireland than in US.

The unemployed and the underclass in Ireland are largely ‘invisible’ …. the great failure of the so-called boom was that no effort was made to push this generational underclass into the ‘educational and labour force’ – a few, naturally enough, take to crime. Labour force participation rates also matter – only in recent times did the female labour force participation rate exceed 50% …. I’m a bit out of touch with these figs, but if one included many of those who are ‘not included’ in the published figs suggests that the ‘effective/real’ rate of those not involved in economic activity is higher; not sure where our dependency ratio is at the mo …. but looks like much more notice to be taken in all these areas again ….

@ Eoin Bond

Regardless of previous cultural factors having effects on Irish People being adverse to default I don’t think its safe to presume that this time the Irish will continue their trend extreme default anxiety.
For lots of reasons.
1. A lot of the mortgage default will be from young first time buyers and business investors on mortgages taken out between 2004-2008. I dont think young celtic cubs would have had the strong moral adversity as their parents would. In good old Catholic Ireland default would have been seen as immoral.
2. Huge non mortgage debt that people have is greater than in other times.
3. The Size of the bubble. Ireland’s housing bubble relative to wages is believed to be one of the biggest of any time.
4. Policy change. What happens when the ECB get their way and the state is forced to sell off assets including the mortgage books to the highest bidder. One would think that this would lead to less can kicking when it comes to the way the banks are treating people who are not making payments.
5. You could actually argue that given the bubble was bigger than anywhere before using US/UK traditional levels of default is generous.

@Jadpig

1)

If the stress tests only require 20bn, then will the contingency fund not simply be 15bn (rather than 25bn)?

If not, then I would have thought it was fairly straightforward that we would use our own money rather than borrow another 15bn at 5.8%.

2)

That said the NPRF did get a return of 11.1% in 2010 on its discretion portfolio (non-AIB/BoI) so perhaps there IS an argument to borrow 15bn at 5.8% rather than take it from the NPRF who can get returns which are larger than our interest rate.

3) However, I was under the impression we would exhaust our own resources on bank recapitalisations before using borrowed money (although I don’t believe this is written as fact anywhere).

My understanding is that there is a big difference between US and Irish mortgages.

In the US, mortgages are basically non-recourse loans. The bank can not go after other assets/income once it has seized the house.

By contrast, in much of Europe and in Ireland as well I believe, the bank can still go after other assets/income if the proceeds of the sale of the seized house prove insufficient to repay the loan.

I believe that woul explain much of the differences in repayment behaviour between the US and Europe.

@ Incognito

you are correct, which is why i assume they have brought in the UK data as well to moderate that affect. But i think they are trying to mirror a situation whereby mortgagees don’t care about the stigma of defaulting, as well as the damage to their personal credit scores. I don’t think they will assume that Irish mortgages default 1:1 on the same level as either the UK or US, but simply to say, “Well, what if it had some similarities….”.

@BEB

Agree. The ease of (or lack of) default in different countries as well as historical data has to be considered when predicting a default rate. Do the reasons for a historically low level of default suddenly not apply now? Maybe if it was just the banks history of forbearance… maybe not if it is due to the difficulties of defaulting as well as social reasons.

@Bond Eoin Bond – “though i doubt we’ll actually end up seeing such a cultural shift in attitude to debt.”

Hmmmm – I’m not so sure. I think that times change and people change. We may be witnessing that change in these times. ‘Cultural’ shift. Seismic?

@Kevin O’Rourke

Highest congratulations on your Oxford appointment. As it is quite a long time since Fianna Fail controlled Oxford City Council, I expect that you are hoping the absence of corrupt-FF-politicians-in-the-pay-of-evil-developers will enable you to purchase a quality house in Oxford at a price well below the artificially high price that one could expect to pay for it in Dublin because of said corruption. I trust that you will not be disappointed. If you are considering selling your Dublin house, I’d consider putting in a bid for it, but only if Professor Morgan Kelly does the valuation.

With regard to the live register figures, the 1,100 increase is little more than statistical noise. I will stick my neck out and predict that it will eventually be revised to a small decrease. I give my reasons below for predicting that.

The reality is that the live register figures have been more or less flat for 15 months. Nearly all increases or decreases since then, that were given in the first figures published, were later revised away. THese are the latest CSO seasonally-adjusted live register figures (in 1,000s) each month since January 2010. The unadjusted figures are in brackets.

Jan 2010: 435.0 (436.9)
Feb 2010: 431.8 (437.0)
Mar 2010: 431.1 (435.1)
Apr 2010: 435.2 (432.7)
May 2010: 440.2 (437.9)
Jun 2010: 441.7 (452.9)
Jul 2010: 445.6 (466.8)
Aug 2010: 448.6 (466.9)
Sep 2010: 448.8 (442.4)
Oct 2010: 448.3 (429.6)
Nov 2010: 446.1 (425.0)
Dec 2010: 446.0 (437.1)
Jan 2011: 441.7 (442.7)
Feb 2011: 440.9 (444.3)
Mar 2011: 442.0 (441.2)

As can be seen, very little change in 15 months. A slight increase between January and September 2010, but a fall in every month since then until today’s figures.

Some of the largest increases and decreases since January 2010, that were given in the first figures published and which triggered threads on this site, were later revised away. For example, the initial estimate for September 2010 was a decrease of 4,000. It has since been revised to an increase of 200. The initial estimate for December 2010 was an increase of 5,000. It has since been revised to an decrease of 100. Threads were opened on this site when both the September and December figures were first published. Nearly all the comments in them, including my own, look silly now, because the figures have since been revised by the CSO to give the exact opposite of what was first published.

The CSO normally revise all the monthly seasonally-adjusted figures in a given year at the end of that year. They revised all the 2010 seasonally-adjusted figures in January. The overall figures stay the same, but the monthly seasonally-adjusted figures are all changed. The changes cancel each other out. Some are revised up, some down. So, the September 2010 figures, at first thought to be good, now appear bad. And, the December 2010 figures, at first thought to be bad, now appear good. It is not the fault of the excellent CSO. Seasonal-adjustment often produces quirks and distortions. The seasonal-adjustments can only be computed accurately at the end of the year in question.

This is why I predict that the figure published today for March 2011 will be revised at the end of the year to show a small decrease. Look at the figures above. In March 2010, the unadjusted figure fell by 1,900. Following the end-2010 CSO revisions, the CSO estimated that this represented a seasonally-adjusted fall of 700. Now today the CSO figures show an unadjusted fall of 3,100, which is 1,200 greater than the unadjusted fall in March 2010. But, the preliminary CSO estimate is that this represents a seasonally-adjusted rise of 1,100. Clearly a quirk. If the end-2010 revision converted an unadjusted fall of 1,900 in March 2010 to a seasonally-adjusted fall of 700, there is a high probability that the end-2011 revision will convert a greater unadjusted fall of 3,100 in March 2011 to a seasonally-adjusted fall of between 1,000 and 2,000.

All this is nit-picking, of course. As I said, the reality is that the live register figures have been more or less flat for 15 months. This is highly unsatisfactory. However, regardless of how well the manufacturing and services exports sectors perform, there will be no significant fall in the live register numbers until the construction industry resurges. The GDP figures last week showed that construction output as a percentage of GDP had fallen to 3.5% by Q4 2010. This is probably the lowest recorded in any developed country since World War 2. In most developed countries, it is around 8%. It needs to be brought back to this level in Ireland asap. It will eventually, of course, of its own accord, since no developed economy can continue indefinitely with such an absmal share of its GDP accounted for by construction. The collapse to 3.5% is the price being paid for the media/academia’s declaration of war on the construction industry over the past decade, in which those active in that industry have been branded as corrupt crooks, and whose current demise, temporary though it is, has been the subject of universal gloating in media/academia circles.

With regard to Dan O’Brien’s article on the GDP figures, and the Central Bank’s over-estimation of them by 0.8% (CB forecast of -0.2% versus actual -1.0%)conveniently omitted in the article is any mention of the fact that the Central Bank have under-estimated GNP by 0.9% (CB forecast of -3.0% versus actual -2.1%). Have we not been told by leading economists for the past 30 years that it is the GNP figures that matter? In fact, reading Dan O’Brien’s article, the letters ‘GNP’ don’t appear in it at all. Dan’s whole article is about how the economy was collapsing in Q4, based on the fall in GDP, but not a mention of the fact that GNP rose by 2% in Q4 and by 4% cumulatively between Q1 and Q4, despite the fact that on numerous previous occasions, when the GNP figures were worse than the GDP figures, the same Dan wrote that it was the GNP figures that matter. It is called ‘having your cake and eating it’.

The unemployment figures will worsen. Emigration has been throttled back at least to the less radioactive hemisphere. You can pay them the dole while we sort ourselves out …..

This is a depression. Of far greater depth than the other one, last century. But fewer people will starve and there are extra houses for the duration.

I predicted displaced persons a few posts ago. For the moment, they are Japanese and will require your best rice and warmest lodgings. There will be more. Ireland of the welcomes? Well heeled refugees are like long staying tourists!

@ Eoin Bond

I think (for what it’s worth) that the poor Irish Mortgagee is always willing to pay – i.e. not unwilling to pay. It’s when the shift from not unwilling to not being able to pay happens that we will see a cultural shift. Kinda mirrors the whole sovereign thing!
Either way I suspect MK will be right.

John – interesting point that CSO misreported drops in the live register when in fact there were increases. Was this politically motivated? How independent is the CSO?

I have been arguing for a long time that a key issue at the moment is non representation of the following groups in the figures:

1. Married couples where one is working, the other is unemployed – after 12 months the unemployed spouse loses benefits but doesn’t reapply for JSA because he/she would be rejected on spousal income grounds (he/she could of course claim for USC credits only)
2. Similar scenarious in familes with under 25s living at home who will not qualify due to parental income
3. Combinations of the scenarios above involving self employed spouses and parents – again benefits might be quite low and would offset the cost of accounting (my own tiny business costs me 2800 a year in accounting fees though admittently they do absolutely everything including contract management, payroll and invoicing as well as tax returns and VAT). So some people might not be able to afford the cost of an extra set of audited accounts.
4. Lastly the huge delays in processing some JSA applications and appeals may mean that there is a long delay in moving from limbo to being recognised as jobless. Again this was very politically expedient to encourage for FF.

Being jobless doesn’t mean you don’t have work. Likewise, having a job doesn’t mean you have security of income or work continuity.

Over time the EU and the Eurozone will make adjustments to deal with the problems created by states who think Europe is the wild west. I see corporate tax rates having a mandatory lower bound, similarly for VAT. In return there would be a EU wide unemployment insurance levy which would pick up extensions to the eligibility period when the unemployment rate exceeds 10% or so. Countries in distress with high deficits and high unemployment will get interest rate relief under defined conditions. Europe and the Euro Zone address problems caused by large trading countries such as the USA, Japan, China, and coming on strong Brazil, Russia, India. There is no single country in Europe strong enough to counter balance the competition. In effect each European country will be member of a federation. There are many examples of federations such as the USA, Germany, Canada, Russia before and after 1989.
In Ireland we fantasize that we are a Sovereign State capable of going it alone, we will go nowhere outside an arrangement similar to the one we are in now. I hope we are not in for a replay of the glorious Dev era where we played the nationalist, protectionist card as the economy stagnated and people experienced extreme poverty. We should remind ourselves that our past and recent behaviour has not been rational. The first thing that must be done is eliminate the need to hold a referendum to pass treaty changes. The Irish electorate is even more irrational than the Irish Gov’t.