The Labour Market Looks Strong: But for How Long?

More people are joining the labour force and more are getting jobs:

The attached graph shows that the trend noted in our last commentary on the labour force, that the labour supply is getting increasingly tight, has continued.  In mid-2022 the rate of unemployment was 4.4%, only slightly above the lowest on record and below the pre-epidemic nadir of 4.8% at end 2019.

 

The same is true in the UK but there maybe an explanatory factor for the low rate of unemployment is a decline in the participation rate  – the share of the population of working are who are working or seeking work. In the UK it is suggested that some of the cause is withdrawal from the labour force by people suffering from long Covid and possibly also complications due to non-treatment of health conditions when hospitals were struggling with Covid patients.

But the Irish data must throw some doubt on that analysis since, although the two countries are fairly similar, here there has been an increase in the participation rate since the end of the crisis. It now stands at 65% which is higher than before Covid struck. It follows of course that the rate of employment has also risen and is now 61% compared with 58% at the end of 2019.

In number terms there has been an increase in employment by over 200,000 (or by 8%) compared to pre Covid.

This is a pretty remarkable achievement for the Irish economy. How much of it will be retained as we enter a protracted period of high energy prices, and inflation generally, remains to be seen.