• Irish jobs growth remains solid but slightly less than expected in Q4 2014.
• Switch from part-time to full-time jobs hints that recovery is getting stronger traction.
• Revised unemployment rate drops to 10.3% in January 2015-lowest in six years.
• Jobs data consistent with underlying economic growth rate of 3-3.5% in 2014.

Jobs data for the fourth quarter of 2014 released by the CSO today show an increase in numbers at work of 9.7k on the previous quarter and 29.1k on the year. This is the ninth quarter in a row that numbers at work have increased and as such, these data suggest the turn the Irish jobs market is now well-advanced.

Employment increased in nine of fourteen economic sectors over the final three months of 2014 and in only two of fourteen sectors were numbers at work lower in the final quarter than a year earlier (public admin at -0.3k and education at -0.7k). In both of those instances the declines were marginal and likely reflected the influence of public sector early retirement incentives. So, these data hint at a broadening of the recovery in employment.

The increase in numbers at work in the final months of 2014 was perhaps a little less than might have been expected given a range of indicators showing strong gains in activity, as well as number of upbeat jobs components in a number of surveys and a steady improvement in income tax receipts. However, our sense is that the underlying situation in the Irish jobs market may be stronger than today’s headline data suggest.

The Q4 outturn reflects an increase of 16k in full-time jobs partly offset by a decline of 7k part-time jobs. A switch to full-time employment may reflect the recovery in the jobs market moving towards a more mature stage. So, it might be argued that the quality of employment is improving- an outcome that seems consistent with a pick-up in consumer spending and housing market activity. Today’s headline figure is also reduced weakened by a sharp reduction in employment in agriculture in the final quarter. This may reflect increased opportunities in other sectors as domestic demand began to increase.

Unemployment continued to fall in late 2014 as it has for the last 11 quarters. We previously expected unemployment to drop below 10% during 2015. This looks likely to happen in the next few months and with domestic demand set to strengthen we now think the unemployment rate could fall below 9% by the end of the year.

As Irish economic growth statistics can be significantly influenced by developments in the multinational sector, jobs data can provide a ‘sense check’ on GDP and GNP estimates in terms of how they represent conditions across the broader Irish economy. According to today’s release, the rise in employment in the Irish economy in 2014 in terms of full-time job equivalents was 2.2%. Allowing for productivity gains, these data suggest the underlying growth rate for economic activity last year was in the region of 3 to 3.5% which compares to a likely outturn for GDP growth of around 5%. As we expect the pace of jobs growth in 2015 to be broadly similar to that of 2014, this points towards an economic growth rate in the region of 3.5%for this year.

Austin Hughes
Chief Economist
KBC Bank Ireland plc
Sandwith Street
Dublin 2
T: 01 664 6892 / 01 664 6889
W: www.kbc.ie