Covid-19 unemployment shock to last until end of 2023, ESRI warns

In this third lockdown, the tougher restrictions on the construction industry, which employs many thousands of people, will have implications for people finding work. Picture: Andy Gibson.

Tougher-for-longer Covid-19 restrictions amid the delay in rolling out vaccines will likely mean the unemployment crisis will take a year longer to unwind than previously thought, a leading expert has warned.

Professor Kieran McQuinn of the Economic and Social Research Institute (ESRI) said getting back to the pre-Covid rate of unemployment of 5% of February last year will now take to the end of 2023, and not the end of 2022, as the ESRI had earlier forecast. 

In its new forecasts, unemployment will still fall back to 10%, equivalent to more than 250,000 people, by the end of this year.  

But Prof McQuinn told the Irish Examiner that the ESRI now forecasts an average unemployment rate this year of 17.4%, up significantly from its earlier forecast of 14.5%, "mainly because the lockdown we forecast at Christmas was less severe than the one that has come to pass." 

The comments come as the CSO said unemployment climbed to 25% of the labour force in January, figures which include the large number of people requiring the Pandemic Unemployment Payment by the end of last week.   

The threat of long-term unemployment looms larger because of the tough restrictions on the construction industry, while the big unknown will be the unwinding of the Employment Wage Subsidy scheme and business supports and the effects on long-term jobless, Prof McQuinn said.   

By the end-June quarter, Prof McQuinn said the ESRI now sees unemployment falling back to 18.5%, a forecast based on the way the economy emerged from the first lockdown last year.

However, in this third lockdown, the tougher restrictions on the construction industry, which employs many thousands of people, will have implications for people finding work.         

Prof Kieran McQuinn: 'The longer we go on with this [lockdown] and the more significant the shock in relation to the restrictions, I think that pushes out further and further the point at which we get back to the kind of unemployment rate we had at the start of 2020.'

Prof McQuinn said unemployment in the coming months will likely rise again to match the peak of 28% reached in the first lockdown in the spring of last year. 

"The longer we go on with this [lockdown] and the more significant the shock in relation to the restrictions, I think that pushes out further and further the point at which we get back to the kind of unemployment rate we had at the start of 2020," Prof McQuinn said.  

Department of Social Protection figures published earlier this week showed the number of PUP claimants had risen by 4,270 to 479,633 people, as the effects of the third lockdown continue to lead to a shakeout of jobs.

At 118,810, accommodation and food services is the single largest industry that requires the PUP payments, followed by wholesale and retail, which account for 76,367 people. Significantly, the number of construction workers on the PUP is not far behind, at 62,530.

The figures mean the number of people claiming some sort of Government support so far during the third lockdown is close to 1m, when the unemployed on the live register, the PUP, and the people whose jobs are being subsidised by the Government's employment-subsidy scheme are included. 

In the first lockdown, the number requiring some sort of Government support peaked at close to 1.2 million.