The concept of a “jobless recovery” is well understood, by which employment growth lags output growth. Today’s ESRI QEC argues that the opposite pattern is currently evident in the Irish data, highlighting the adverse impact of the patent cliff on measured GDP and arguing that the underlying employment data tells a more positive story. See, in particular, this note by John Fitzgerald.
Yesterday’s presentation by the Department of Finance also provides a lot of interesting detail on the macro outlook – here.
15 replies on “Jobs without Growth?”
The divergent trends in the labour market and measured GDP are also evident in the latest Finance pre-Budget forecasts- nominal GDP in 2014 is now projected to be 4bn lower than previously forecast with real GDP growth cut by 0.6 percentage points but employment over this year and next has been revised up by 1.5% and the unemployment rate down by 0.7%. Consequently, the implication is that Finance will revise up their income tax forecast and revise down their social welfare spend despite what on the face of it was a bleaker outlook. One caveat though; half the annual rise in employment in q2 was in agriculture and the CSO warn about sampling issues there so the optimism on job creation may be a tad optimistic, but we will see.
So, John McHale’s council “endorses” the macroeconomic forecast in the DoF document yesterday (real GDP growth of 0.2% in 2013 and 1.8% in 2014).
If that is indeed the case, then the council presumably thinks the ESRI are today a bunch of poopy-heads for projecting 2013 growth at 0.5% and 2014 growth at 2.6%. Because no self-respecting council would endorse a 1.8% projection for 2014 if it felt 2.6% was more endorseable, because you wouldn’t want to inflict unnecessary budget adjustments, would you?
And if indeed, the ESRI are poopy-heads whose projections are unedorseable, why are they funded by the State to the tune of €2.7m per annum?
@ JS
Your scepticism is justified. Forecasts are one thing, outcomes are another. What we have is the appearance of a change to financial planning and control of public expenditure, not the reality.
“Revised troika MOU; Expenditure Ceilings
23. Following the enactment of the Ministers and Secretaries (Amendment) Act 2013 on 23 July 2013 the authorities will publish, by August 2013, a circular specifying the operational details of the ceilings – including the circumstances under which they can be revised and on the correction mechanism.”
http://www.irishstatutebook.ie/pdf/2013/en.act.2013.0029.pdf
Either we get to the stage where committees of the Dáil monitor and debate, as would be the case in other small advanced economies, the spending within their area of expertise or the country is doomed to repeat the failures which have brought the country low on three occasions.
The caveat in the figures from the QNHS relates only to the estimated distribution of employment to the Agriculture, Forestry and Fisheries sector; it is not a caveat about the estimate of total employment in the economy.
http://economic-incentives.blogspot.ie/2013/09/employment-patterns-numbers-employed.html
@ JS
The sentence in the legislation which undermines IMHO the entire exercise.
“(5) The Minister for Finance shall, on behalf of
the Government, inform Dáil Éireann of a
decision under subsection (2) or (3) as soon as may
be after the decision is made.”
The country cannot afford a continuation of pork barrel policies in which departments and their ministers are effectively in sole charge.
Maybe!
The QEC says::
Some of you may recall a month ago that Joan Burton, minister for social protection, told a press conference: “Ireland is now firmly in recovery mode,” having broke some good news at a Cabinet meeting. “I have just got the figures for the Live Register this week, it’s fallen by 7,700.”
At the end of September, there were 500,000 on the Live Register including 86,000 in publicly funded activation programs.
The 86,000 unemployed are counted as employed or in ‘Back to Education’ courses.
In April there were 33,000 in ‘Back to Education’ courses and 21,000 dropped off for the summer months with some signing on the Live Register (as the education allowance is not paid during the summer period). In September they returned to courses and this was why Joan Burton thought there was a jobs miracle in the making as they signed off the LR. The seasonally adjusted fall in the month was 2K.
I have a suspicion that part of the rise of 33,000 additional jobs in the year to June 2013 reflects an understatement of earlier quarters.
Q1 2012 showed a non-seasonally adjusted drop in jobs in the quarter of 22,000 even though the Live Register fell as well.
Seasonally adjusted net jobs rose 11,000 in Q1 2011 and fell 8,000 in Q1 2012.
In the QNHS June 2013, almost half the jobs added (15,000) are in self-employment. It is not clear how many of these are classified as full-time.
On Dan McLaughlin’s point on agriculture employment, the CSO has said that its total for employment is okay but the sectors may need to be revised. It’s interesting though when a construction worker with a small farm loses his job, is he then considered a full or part-time farmer?
Part-time numbers who want full-time work was at 149,000 in June 2013 up from 4,000 in 2007.
I’m not disputing that there have been jobs added but data remains fragile. The CSO has reported falls in its monthly services index in July and August.
Full-time jobs in agency-assisted foreign firms in Dec 2012 were down 3,700 on 2007.
As regards the growth impact, there are 235,000 people either in activation programs or underemployed – – 11% of the workforce . Together with 301,000 officially unemployed, that gives a total of over 24% who are not making big bucks.
Is that a basis for a big growth surge in 2014?
There are 30,000 working in Tesco and Dunnes Stores.
On exports, the ESRI predicts a 7% rise in revenue diversions from the likes of Google and Microsoft in 2014. The net exports contribution to growth from these exports depends on timing of intercompany charges.
New Ibec figures shows that 8,259 new jobs (to be filled over a number of years) were announced in the 6 months to Sept led by 1,600 from Glanbia.
This isn’t very impressive given the attrition level.
Enterprise Ireland reported that client companies created 12,861 new jobs in 2012 resulting in a net increase in full-time employment of 3,338
IDA Ireland said 12,700 new jobs were created in 2012 resulting in 6,600 net jobs added.
On a general note the OECD data that shows a high level of semi-illiteracy in Ireland and other advanced countries is shocking.
Finland again shows what a small country in crisis can do to positively change its education system.
Finland has no fee-paying schools nor university fees.
The OECD has said: “Finnish schools seem to serve all students well, regardless of family background, socio-economic status or ability.”
This week the OECD reported that adult numeracy and literacy was highest in Japan and Finland – – anything to learn that would be new??
I guess not!
http://www.finfacts.ie/irishfinancenews/article_1026662.shtml
On the subject of the thread (for once) , just as a matter of interest;
How exactly do jobs numbers increase when the economy does not grow at all?
Are better off people forfeiting income, so that the income forfeit is distributed to proportionally more new employees, or are savings being diminished to invest in new jobs? But that would increase growth?
Its sounds strange to me, but I’m sure there is a simple explanation.
@ All
FYI
http://www.independent.ie/business/irish/promissory-notes-unusual-but-not-unlawful-finance-official-29647902.html
Irrespective of the outcome of the case, the implications for the future of control of public expenditure are likely to be considerable.
Jobless weak recovery seems to be the Zeitgeist. Le Temps is a Geneva daily and today’s front page headline is “economic growth insufficient to absorb unemployment”. Swiss economists assumed unemployment would fall with growth in excess of 1.5% but now growth is 2.5% and unemployment is still rising. This “decalage” or decoupling has never been so pronounced , according to the article.
Cartoon of the day
Economy:
End of growth
9 October 2013 Internazionale Rome
http://www.presseurop.eu/en/content/cartoon/4215631-end-growth
From John Fitzgerald’s note:
‘To calculate the volume of output the CSO takes the value of sales and deflates it by a suitable price index. This price index includes only drugs which were on sale both in the last month when the patent applied and in the first month when the patent had ended. Because the ending of the patent is treated as giving rise to a new drug, this drug (whether patented or generic) is excluded from the price index. Thus the price index does not change between the two months, while the value of sales of the specific drug, which loses its patent protection, falls dramatically.
As a result, all of the fall in the value of sales due to the loss of patent protection is treated as a fall in the volume of production. While this may seem counterintuitive it is the standard national accounting practice.’
Counterintuitive is one word for what is described!
Am I right in concluding as follows:
GNP is in fact growing, and growing sufficiently to more than offset the fall, both real and statistical, caused by the pharma sector to GDP figures.
The employment increase resulting from GNP growth is much stronger than the employment fall, if any, occurring in the pharma sector.
It’s important to distinguish a spurt in demand in a recovery rebound and sustainable growth.
John FitzGerald said in January 2010: “We will see a vigorous recovery in 2012.” He added that the economy could expand by as much as 5% a year between 2012 and 2015.
Speaking at the ‘Checkout’ annual retail conference, he said a short-term boost to the economy was likely to kick in during 2012 as consumers once again started spending money. Workers have been pouring money into savings accounts, building financial security nets in case they lose their jobs as the employment rate hit 12.5%.
On sustainable growth, past jobs data is more sobering.
1. While full-time jobs numbers fell by a total of 25,000 in both FDI and indigenous internationally trading firms in 2000-2012, headline exports grew at current prices by 71% in the period and at constant prices by 59% .
2. Jobs have been static in chemicals and medical devices at 43 to 44k in the period 2003-2013.
3. According to Forfas, export intensity (exports as a percentage of total sales) of Irish manufacturing and international services sectors averaged at a little more than 40% over the period 1990-2006
In a period of unprecedented bubble growth, the indigenous sector added only 10,000 jobs in 2001-2007 or 7% while the FDI sector lost the same number.
So, what is different now?
4. Construction? Last June there were 96,000 employed in the sector and there were 95,000 employed in April 1996. There were 34,000 houses built in that year.
While comparisons with the mid 1990s are useful, some account needs to be taken that the population of the state is now one quarter greater than then. This may not impact construction especially, as this may have greatest employment when population is increasing quickly, not after that increase.
[…] –Recoveryless Jobs: Philip Lane notes that Ireland is having the opposite of a jobless recovery. “The concept of a “jobless recovery” is well understood, by which employment growth lags output growth. Today’s ESRI QEC argues that the opposite pattern is currently evident in the Irish data, highlighting the adverse impact of the patent cliff on measured GDP and arguing that the underlying employment data tells a more positive story. See, in particular, this note by John Fitzgerald.” […]