Jobless hike ‘may lead to further market slump’

A SENIOR economist has warned the first increase in the number of dole claimants in four months could just be the start of a further slump in the labour market due to the austerity measures introduced by the Government last month.

Figures released by the Central Statistics Office showed the numbers on the seasonally adjusted live register increased by 5,200 to 444,000. That meant a 3.2% increase in the number signing on at the end of 2010 compared to the end of 2009.

The unemployment rate at the end of December stood at 13.4%, up from 13.2% in November.

There had been optimism the economy was on the turn given the decline in the number on the live register in the four months leading up to December.

Bloxham chief economist Alan McQuaid pointed to a number of factors that could have contributed to latest “sharp jump” in the latest figure.

“HSE redundancies are likely to have contributed to the jump,” he said. “Apart from the usual seasonal factors associated with December, the extreme weather conditions in the month were probably a factor too in the increased numbers on the dole.”

However, he added that the severe fiscal austerity measures announced in last month’s budget “are unlikely to improve consumer confidence or personal spending which will in turn weigh negatively on labour market developments”.

“In overall terms the outlook for employment remains fairly downbeat in the immediate future, with the numbers on the live register still extremely high,” he said. “A pick-up in the labour market tends to lag recovery in output/GDP by six to nine months, so it is likely to be the middle of this year at the earliest before there is any real sign of underlying improvement in employment conditions.”

Mr McQuaid also warned that further losses in the construction, financial services and retail sectors look inevitable in the short-term.

Nonetheless he still forecast that the jobless rate will not go above 14% though he added that increased emigration would be a key factor in limiting the rise.

Other headlines in the CSO’s latest report included a monthly unadjusted increase of 7,080 or 2.6% in short-term (less than one year) claimants on the live register in December and long-term claimants increased by 4,997 or 3.3%.

ISME chief Mark Fielding forecast that further reductions in income due to tax increases will only add to the jobs crisis.

“What is urgently required is the introduction of policies to provide the confidence for businesses to start investing and creating employment,” he said.

“The current reality is that business owners see an administration that has no plan to address business concerns, with companies consequently in survival as opposed to expansion mode. Thousands of businesses will continue to shed jobs over the next number of months, unless immediate action is taken.”