OLIVER MANGAN: Migration from outside EU boost for labour force

The latest set of Irish labour market data published last week by the CSO saw the unemployment rate revised up from 5.1% to 5.9% for the most recent month, July.

There were significant upward revisions to the unemployment rates for the previous four months as well.

Normally, this could be a cause for concern, but not on this occasion.

The revisions to the unemployment figures are due to a significant pick-up in growth in the labour force this year.

A marked increase in inward migration and a rise in the participation rate saw the labour force expand by 2.5%, or 58,000, in the second quarter over the same period last year.

By contrast, it rose only 25,000, or just over 1%, in 2017.

About 33,500 of the 58,000 rise in the labour force is accounted for by foreigners.

CSO data on population show that most net inward migration by foreigners is from countries outside the EU.

There was net inward migration of 21,000 from non-EU countries in the year to April 2018, but just 13,000 from EU member states.

The participation rate is the number of persons in the labour force expressed as a percentage of the total population aged 15 and over.

It has been quite static in this decade at levels well below those that prevailed in the last decade.

However, the latest data show a good rise in the participation rate in the second quarter of 2018 from year-earlier levels, boosting the size of the labour force.

Growth in employment has averaged over 3% since 2013 and there is no sign that the rate is slowing down.

The numbers at work increased by 3.4%, or 74,000, in the second quarter of 2018 from year-earlier levels.

Two sectors accounted for a significant portion of the rise.

Migration from outside EU boost for labour force

Employment in construction rose by 17,800 or 14%, while the numbers working in the hospitality sector (accommodation, bar, food services) increased by 17,300, or almost 11%.

Other sectors saw good jobs growth as well. The numbers in public sector employment rose by 6,500, while employment in professional-technical jobs was up by 7,300 and support services increased by 9,500.

Virtually all the growth in employment was accounted for by full-time jobs, another sign of a strong economy.

The unemployment rate in the second quarter stood at 5.8%, down from 6.7% a year earlier.

The decline in the jobless rate is slowing as it stood at 8.8% two years earlier in the second quarter of 2016.

The slowdown reflects the fact that more people are coming into the labour force looking for work, both from at home and abroad.

This is to be expected in a rapidly growing economy and it is critical if strong economic growth is to be maintained, given that unemployment has fallen to relatively low levels.

Indeed, the latest data show that the long-term unemployment rate (unemployed for one year or more) has fallen to just 2%.

Thus, the labour market is tightening. This has led to a pick-up in wage growth. The latest CSO data show that average weekly earnings rose by 3.3% year-on-year in the second quarter, with all sectors of the economy seeing wage growth.

Average weekly earnings rose by 2% in 2017 and 1% in 2016, so wage growth is certainly picking up.

Meanwhile, unemployment looks set to fall further as growth in employment continues to outpace growth in the labour force.

We would expect the jobless rate to decline to close on 5% by the end of next year.

Oliver Mangan is chief economist at AIB


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