Covid rebounds: Unemployment drops to 21-year low of 4.2 percent

Unemployment in the Irish economy fell to a 21-year low of 4.2 per cent last month as increased economic activity in the wake of Covid dragged more people back to work. This was down from a rate of almost 6 per cent a year ago. The last time the State’s jobless rate was this low was June 2001.

The Central Statistics Office (CSO) said the seasonally adjusted number of people classified as unemployed in July was 113,000 compared to 113,900 the previous month. This equated to an annual decrease of 36,000.

The Irish economy's distinguishing characteristic in recent months has been the quick recovery in employment with the relaxation of limitations relating to Covid. This is in spite of the fact that inflationary pressures and the ongoing conflict in Ukraine are predicted to cause a dramatic slowdown in GDP both here and throughout the euro zone. According to economists, a 4% unemployment rate in this country is equivalent to full employment.

Paschal Donohoe, the minister of finance, has cautioned that the economy may soon be under pressure for overheating due to the return to nearly full employment. Ibec, an organisation representing employers, issued a warning last week, stating that there were now indications of a fall in the demand for labour due to mounting business cost pressures.

Andrew Webb, chief economist at Grant Thornton Ireland, commented on the most recent figures by saying: "The labour market is holding up quite well in the face of severe adversity. We are in a "cut back economy," where many households must shift some of their spending from desirable products to necessities due to the high cost of living.

"This could be expected to cause the labour market to contract, but encouragingly, performance in important industries like the health sciences, agri-food, and professional services is strong, and job openings are holding steady. The economy's future outlook is cautiously hopeful, but much will rely on how much energy prices rise as we switch back on the heat as we enter the chilly months of October.

With the economy operating close to full employment, there is upward pressure on salaries, according to Jack Kennedy, economist at the job-search website Indeed. Expectations of rising prices are likely to make this worse; according to research published by the Central Bank of Ireland last month, respondents predict average inflation of 10% over the next year.

"Ireland's appeal to foreign employees is a positive trend that can lessen the load on the labour market. According to a recent Indeed study, Ireland is one of just five nations in Europe that is experiencing a brain gain rather than a brain drain, which means that foreign job seekers are more interested in finding employment there than Irish job hunters are," he said.

"Census data showing a net inward migration of almost 190,000 persons between 2016 and 20224 supports Ireland's appeal to new immigrants. That works out to roughly 32,000 people annually, and many of them are lured to the career opportunities that are available, particularly in highly skilled fields like IT, finance, and professional services, all of which saw employment levels increase even during the epidemic, the expert added.