Irish unemployment 'back at pre-pandemic level as soon as next year'
Finance minister Paschal Donohoe said that the Department of Finance has raised its economic outlook
Unemployment could be back to its pre-pandemic level as soon as next year, as the economy rebounds from the worst of the Covid-19 crisis, leading independent economists have predicted.
Kieran McQuinn, professor at the Economic and Social Research Institute, said that double-digit expansion of the economy is leading to a faster-than-expected recovery and unemployment by the end of next year could fall back to 6%, close to the sub-5% rate posted on the eve of the crisis in spring 2020.
Senior economist Jim Power said the pre-pandemic jobless rate could be reached as soon as next summer, if there were no new flare-ups in Covid-variant cases and if household energy bills were to level off.
Since June when the Covid restrictions started to be lifted, consumers have started to spend, and the years-long exports boom by multinationals has continued, Mr Power said.
The independent projections come as the Department of Finance released a new economic outlook that showed it had strongly increased its growth forecasts from those published as recently as July, in its Summer Economic Statement.
In a presentation, chief economist at the department, John McCarthy, said the Government sees GDP climbing by 15.6% this year and by 5% in 2022.
In terms of modified domestic demand, an alternative measure that can better show activity in the domestic economy, output, will also rise strongly, by 5.2% this year, and by 6.5% in 2022, the new forecasts show.
The Government sees unemployment at 7.2% in 2022, which implies that level will be lower than this average rate sometime during the year.
The Department of Finance said the outlook for employment had improved significantly during the summer, but that "some scarring" could persist from the pandemic.
It projects average unemployment rates of 6% and 5.3% in 2023 and 2024, respectively.
The department's forecasts predict the unwinding of what it calls the "involuntary savings", or the additional billions in euro held by some households who were unable to spend during the crisis because of the health restrictions.
The household savings rate in terms of disposable income will return to its pre-pandemic level of 5% in 2025, according to the new forecasts.
Mr Power said the huge growth-rate projection improves the budget outlook.
The Department of Finance will release the September tax revenue figures in the coming days.
They will likely show an increase in Vat revenues as households spent during the summer.
Mr Power said the return of international tourism as travel restrictions between the US and Europe are lifted this autumn will also help boost recovery.
However, he said it would be "inadvisable" for finance minister Paschal Donohoe to tap the strong economic recovery to increase any tax-cutting package in his October 12 budget.
DCU economist Tony Foley said that unemployment may not fall quickly because low-paid staff who were most affected by the Covid crisis will struggle to find new jobs.
