Jobless rate steadies at 7.8%, but outlook uncertain

The number of people unemployed in Ireland fell to its lowest level — 169,100 — in nearly eight years last month but not by enough to change the unemployment rate which remained at 7.8%.

The latest CSO data covered the last month before prior to the UK voting to exit the EU and commentators yesterday suggested that the vote will result in an ongoing slowdown in unemployment reduction here.

“The outlook is less certain, given the confidence shock from the Brexit referendum,” said David McNamara of Davy Stockbrokers.

“Last week, we lowered our UK forecasts for 2016 and 2017 and now expect a technical recession through the turn of next year. While this could shave 1%-2% off GDP, it is unlikely that Ireland will be knocked into recession, and multinational sector exports could shield the economy somewhat. However, the impact of Brexit could be more acutely felt in the labour market; 43% of indigenous manufacturing exports go to the UK compared to just 11% of multinationals,” he added.

Alan McQuaid, chief economist with Merrion Capital, suggested Ireland’s overall unemployment rate, for 2016, is likely to be around 7.8%; down from 9.4% last year and 11.3% in 2014.

“We expect the downward trend in unemployment to continue over the remainder of this year, albeit at a slower pace than before,” he said.

With many sectors reliant on trade with the UK and sterling weakening, Irish jobs growth is at risk of slowing from the current rate of 2.4% by the end of the year, according to Davy Stockbrokers.

SME lobby group, Isme said that the slowdown in job creation, here, is not just Brexit-related but also due to “industrial relations uncertainty and unwarranted wage pressure on SMEs.”

The CSO also yesterday published monthly industrial production data, showing that manufacturing output fell by 1.9% in May on a monthly basis but rose by 6.5% year-on-year.

“While output, overall, is higher year-to-date and Irish manufacturing and exports still look set to outperform European peers in 2016, the stellar growth seen in previous years now appears to be slowing,” said Mr McNamara.

Despite a Brexit-induced slowdown in Irish manufacturing pending, Mr McQuaid said another overall rise in industrial production is likely this year, “although it is now likely to be only in low single digits.”