The ESRI is holding a conference on this topic on April 30th: details are here.
The Labour Market in Recession
- Post author By Philip Lane
- Post date April 1, 2009
Category: Economic Performance
Sarah Carey’s article in today’s Times raises a useful point. While figures for average levels of debt are available—and show a huge increase in debt-to-income ratios since the turn of the decade—this average ratio isn’t very useful for informing us about median debt burdens or, more importantly, about the fraction of households close to financial distress. Sarah is correct that, as of now, these statistics are not being collected in Ireland. Surveys are being used to provide estimates of these figures for Italy, Spain and the US and a survey of this type would be very useful here. I’d like to add a couple of observations about this issue.
Today’s release shows that the standardised unemployment rate, which is based on the Live Register, rose to 11% in March from 10.4% in February. Over the past three months, the unemployment rate has risen by 2.4%, compared with an increase of 1.4% over the previous three months.
In terms of projecting GDP for the year, these figures suggest to me that the current “consensus” figure of something like a 6 percent (average-over-average) decline for 2009 is highly optimistic. It is hard to see this huge jump in unemployment as consistent with anything other than a substantial contraction in output in first quarter. With output having fallen by around 7 percent on a Q4-over-Q4 basis last year (whether measured on a GDP or GNP basis) the cumulative loss in output from peak has perhaps already reached 10 percent as we speak.
Once you factor in the contractionary effect of the upcoming budget, it is hard to see the economy producing a quick turnaround after the first quarter. Working through the various scenarios along the lines of my post from last week, it’s very hard to see an average-over-average growth rate better than -8% this year and very easy to imagine scenarios that are worse.
Among the many interesting bits of data in today’s release of the Central Bank’s monthly statistics are the February 2009 data for credit card spending. I haven’t paid too much attention to these before, but they seem like a useful early indicator of retail sales, and they may include cross-border purchases.
Not surprisingly, the February figures are very weak — indeed it seems that January and February 2009 are about the same as the same months in 2006. And these are in nominal euros — not inflation adjusted.
I thought readers might like to see this seven year chart which I have drawn. Of course February is generally the lowest month of the year (though it wasn’t in 2008), but the drop is very striking.
Update: OK, so I’d better deflate this by the CPI as below (Average in 2002=100). I leave it to someone else to seasonally adjust.
The Irish Times profiles Brian in today’s edition: you can read it here.