The Economic and Social Research Institute (ESRI) is anticipating at least one and possibly two further lockdowns next year, if Covid vaccines are rolled out later than thought, as the country's leading think tank prepares its key economic forecasts for 2021.
Research professor Kieran McQuinn told thethat despite the ending of the current lockdown the outlook for the economy was "a bit of a mixed bag" because any spike in Covid-19 cases through Christmas would likely lead to at least one further lockdown next year, before vaccines start to be rolled out.
He said the adjusted unemployment rate would likely go back up to 22%, representing 530,000 people, at the end of December, up from just over 20% currently, and to reflect the toll on jobs even as the latest lockdown comes to an end.
That forecast compares with a peak unemployment rate of 28% reached during the worst of the Covid crisis in the first lockdown in the June quarter, and unemployment of 16.5% in the recent September quarter.
The adjusted unemployment rate includes the people who need the pandemic unemployment payments (PUP) to make ends meet and also the people who have signed on for the regular live register unemployment count. It excludes the many thousands of people whose wages are supported by the wage-subsidy scheme.
Under its baseline scenario, the ESRI has plugged into its forecasts two lockdowns for 2021, while under what it calls a "vaccine scenario", it maps the outlook for the economy with only one further lockdown in the early part of the year.
Mr McQuinn said the effects of each successive lockdown appear to be less damaging to the economy, either because fewer sectors such as construction are shut down, or as people learn to work with the restrictions.
"It is clear that unemployment is still deteriorating because areas such as hospitality have been badly affected," Mr McQuinn said. That has an effect on Government finances because the expenditure of the pandemic payments is increasing as unemployment rises, he said.
"It's a bit of a mixed bag as we move toward the end of the year. It is clear that the second lockdown won't have the same impact on the economy as the first lockdown mainly because the construction sector and some retailers weren't shut down this time," he said.
On trade, Mr McQuinn said it would appear from preliminary data that there were very strong signs of growth, which may mean its forecasts for the year could be even better again.
The ESRI was now unlikely to revise downwards its growth forecast but there were still big differences between people who are affected sector-by-sector by unemployment, he said.
Separately, Gerard Brady, chief economist at business group Ibec, said employment levels will probably rise through Christmas. But he too warned of a further lockdown in the first three months of the year.
Mr Brady said there were hopes that the roll-out of a vaccine would help lower unemployment through the year, depending on how quickly vaccines were approved and deployed.