Mortgage Activity “Remains Subdued”

For good or ill, the future financial prospects of the Irish sovereign depend in various ways on the future of the Irish property market, both via its purchases of NAMA property and its investment in banks with considerable mortgage books.

The Irish Bankers Federation report on the mortgage market (data here and press release here) paints a picture of a market that has almost completely collapsed. NAMAWineLake provides his customary high quality analysis here. I’d note that the series seem to have a seasonal pattern so comparisons of 2011:Q1 with peak may be a little misleading but even year-over-year comparisons paint a picture of a market in freefall. These figures also tie in pretty well with the figures from the new house price index from the CSO which showed a faster pace of price decline in the three months to March 2011 than had been seen since mid-2009.

CSO House Price Index

The CSO have released a new house price index (press release here and data here). Analysis by Namawinelake here.

Men Without Work

The rise in the unemployment rate reveals a grim picture of the impact of the recession. The overall unemployment rate has risen from 4.4% at the beginning of 2007 to 14.6% today. Male unemployment is now 17.3%, while unemployment among men aged 20-24 is 32.3%.

Concentrating on the situation of males in some key age groups, the first Chart shows the unemployment rates for those aged 20-24, 25-34, 35-44 and 45-54 (four-quarter moving average of the Quarterly National Household Survey rates). Unemployment rose dramatically in all fours age groups, but younger men were most severely affected.

During a deep recession unemployment rates do not tell the whole story because people tend to withdraw from the labour force, cease to search for work and are no longer classified as ‘unemployed’ according to the International Labour Office conventions.

The CSO publishes broader measures of unemployment as well as the main ILO rates. The broadest of these includes those marginally attached to the labour force and others not in education who want work and it now stands at 23%.

This broad unemployment rate is not available by age and sex. However, the ‘employment rate’ (the proportion of the population that is employed) is available by demographic group and it sheds light on labour market trends that supplement the information in the conventional unemployment rate.

The second Chart shows the employment rate in each of the four age groups. As we would expect from the unemployment figures, the fall in employment has been most dramatic among younger men. Since the end of 2009 fewer than 50% of males aged 20-24 have been classified as ’employed’, compared with over 75% as recently as 2007.

It is instructive to look at the distribution of ‘non-employed’ men between ‘unemployed’ and ‘not in the labour force’. This is shown in the following four Charts. The proportion of the population ‘not in the labour force’ is lowest among men aged 35-44 and highest among those aged 20-24. But in all four groups there has been a significant rise in non-participation during the current recession. In fact the rise in ‘non-employment’ was split approximately 3:1 between increased unemployment and increased non-participation in all groups. While some of the rise in the numbers not in the labour force may be attributable to increased retention of younger males in the educational system, most of it is likely to reflect drop-out due to discouragement and the belief that no jobs are available.

Previous research has shown that those most likely not to be employed are single males with low educational attainment living in areas of high overall unemployment. It is likely that these factors continue to increase the risk of being without work.

The rise in unemployment and fall in employment leveled off during 2011 but as in recoveries from previous recessions further improvement is likely to be slow and the adverse effects of the contraction in the economy will be felt well into the future.

Let us hope that the ‘jobs initiative’ to be announced later today can make some impression on these figures and will include measures to ‘re-activate’ those who have dropped out of the labour force as well as those who are overtly unemployed.

QNHS for 2010:Q4

Results from the Quarterly National Household Survey for 2010:Q4 are now available (press release here, full release here.)  The seasonally-adjusted unemployment rate for the quarter rose by one percentage point to 14.7%. This is a percentage point higher than the previously available proxy for the seasonally adjusted rate based on Live Register figures.

I’m not sure what the explanation is for such a large divergence between the QNHS and Live Register series for this quarter. One possible factor is that some people are now reaching the expiry of their benefit eligibility and thus falling off the Live Register while still being unemployed. The different behaviour for 2010:Q4 doesn’t seem to reflect a big drop in the labour force, due to emigration for example, because the decline in the labour force was of a similar magnitude to previous quarters.

Triumph of the City

A book that deserves some attention from policymakers here is Edward Glaeser’s new book “Triumph of the City“. The book has nine chapters, along with an intro and conclusion. It makes the case that city-living is, in general, conducive to innovation, health and environmental protection. The nine chapters go through the role cities play in bringing people with ideas together, the role of slums in acting as a pathway from destitution, the attractiveness of cities as places to live, the health advances that have been made in cities, the benefits of building up, the role of human capital policies, and the environmental advantages of cities.  Glaeser puts particular store on policies designed to build human capital in cities through education and through attracting intelligent and entrepeneurial people. Its simplifying his position somewhat but he strongly advocates building up rather than sprawl and he is a critic of the use of building projects as methods of urban renewal. Glaeser has published several highly influential articles in Economics and he really packs ideas into this readable book. If anyone has read it, or is going to read it, feel free to use this thread to talk about some of the ideas in the book as well as their relevance in Ireland.