The economy was once at Status Red

Despite some challenges, we’re in better economic shape than the last time a big freeze hit, says Jim Power.

The economy was once at Status Red

As the country ground to a halt this week due to the severe cold weather and lots of snow, which is in turn being caused by very strange climatic conditions in the North Pole, or at least that is what sensible climate scientists are saying, it is worth reminiscing on where the Irish economy was the last time we had such severe weather conditions.

At the end of 2010, the country was in the depths of a very deep recession. The unemployment rate was moving towards 16% of the labour force, consumer spending was under serious pressure, and employment levels were still in decline.

Generally, the country was in a very depressed state and the snow, in a way, acted as welcome distraction.

Now turn the clock forward. The economy is currently in the midst of the strongest economic conditions that we have seen in a decade, and the vast bulk of economic indicators are moving in the right direction.

In the third quarter of last year, which is the most up to date figure we have, employment in the economy stood at just over 2.2m, 276,000 higher than in the equivalent period in 2010.

The CSO, this week, showed that the unemployment rate fell to just 6% of the labour force in February and the number officially registered as unemployed stood at 141,600. This represents a decline of 194,300 on February 2011.

Back then, many argued that Ireland would never recover from the deep recession, or at least not for generations.

Thankfully, this has not turned out to be the case and the economy has indeed surpassed all expectations over the past three years.

Anytime I write anything positive about the Irish economy, I tend to get a barrage of abuse and stuff I said over a decade ago is dug up and often thrown at me in vitriolic fashion.

No doubt the same will happen this time, but the facts are the facts in relation to what is happening in the economy at the moment.

I would not, for one moment, be naïve enough to suggest that all is rosy in the Irish garden. Despite the strong economic recovery, there are still obvious deficiencies and challenges in the country.

The imbalance between demand and supply in the housing market; the poor quality of many public services, particularly health; and the regional imbalances in economic activity and

development immediately spring to mind.

After a number of years of building few houses, strong pent-up and natural demand has hit the housing market like a tonne of bricks and serious pressures are emerging on the rental and owner-occupied front.

The homelessness issue is not part of the same problem, but it is a significant social problem, nonetheless.

The only solution to the housing shortage is to tackle all of the issues that are preventing housing supply from coming on stream in a timely manner.

All of the obstacles to supply are well known and debated at this juncture, but political bravery will be necessary to dismantle those obstacles. On the public services side, increased investment is required, but that will not necessarily solve the problem.

The manner in which public services are delivered needs a radical overhaul, and nowhere is this more obvious than in the health service.

It may be a tad simplistic, but in my experience, reform of the manner in which health services are delivered will never succeed in the face of diverse and very powerful vested interest groups, who in many cases are more interested in preserving the status quo, rather than engaging in meaningful structural reform.

In relation to regional economic development, it is clear that it is imbalanced and the economic recovery is not being felt to the same extent everywhere.

For example, in the third quarter of 2017, the national unemployment rate stood at 6.9% of the labour force, with the Mid-east region lowest at 6.2% and the Midland region the highest at 9.3%.

Last week, the CSO released regional estimates, which showed for example, that disposable incomes per head of population in the border region were 32.8% lower than Dublin in 2016.

These statistics just provide a brief snapshot of the regional imbalances, but they are very real.

In this context, the Government’s ‘Ireland 2040’ plan should be welcomed rather than be criticised at every opportunity.

At least it represents a large step in the right direction.

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