By Eamon Quinn
Wages will rise by around 3.3% in each of the next two years but some workers will likely fare better than others, the Central Bank has said.
Its latest economics analysis suggests that with inflation staying subdued the upturn in real wages and living standards will be the most significant since the beginning of the recovery.
It said an additional 99,000 people will join the labour force in the next two years, helping boost wages and spending by consumers.
But wages will likely rise the fastest for workers who are already in the keenest demand, including professional scientific and technical workers, as well as those working in financial, insurance, property and IT.
Faring less well could be people in wholesale and retail, construction, and transport where vacancy rates are currently lower than in many other areas.
With “the outlook positive”, the number at work is quickly approaching the 2007 peak, and unemployment will fall.
It will drop from its current rate of 6.1% to an average rate of 5.6% this year and then 4.8% in 2019, where “it is getting close to full employment”, officials said.
Despite again raising its economic outlook, Central Bank officials said there was as yet no overheating in the economy.
Such dangers will increase the closer the economy comes to reaching full employment but there could yet be hidden pools of capacity that will give the economy more breathing space.
Helped by the surge in the value of the euro against sterling since the UK’s Brexit vote in the summer of 2016, inflation will remain relatively subdued at below 1% next year, and help boost real incomes.
The Central Bank raised its GDP growth forecasts to 4.8% this year and to 4.2% in 2019 but issued the now customary health warning over headline Irish economic figures which fail to “accurately measure the income flowing to Irish residents”.
The bank does not forecast house price inflation but nonetheless said the supply of new homes will remain below the levels needed to meet demand.
That means house prices will continue to increase before they stabilise “in a number of years”, officials said.
Brexit, the threat of global trade wars, US tax, and the potential EU digital tax all pose some sort of risk.
On Brexit, the main effect on the Irish economy is still being felt through the slump in the value of sterling.
But a harder form of Brexit would push up the costs for exporters and importers, particularly for firms transporting goods across the so-called land bridge through Britain to other markets.