Employment growth in recent years has been driven by the services sector, especially public services. Employment in the construction sector has also continued to rise. The manufacturing sector has borne the brunt of the downturn, experiencing significant job losses over the last 2 years. The performance of the Irish labour market in 2003 exceeded even the most optimistic expectations. Employment growth accelerated, and by the end of the year there were 1.815 million people in employment, an increase of 44,600, or 2.5%, over end-2002. The labour force grew equally strongly, so that the unemployment rate, having peaked at 4.9% earlier in the year, had fallen back to 4.6% by year’s end, unchanged from end-2002. Unemployment rose marginally in absolute terms, by 2,400 to 86,500, in the 12 months to end-2003. Unemployment in the Border, Midlands and Western (BMW) region actually fell slightly. Initial indications are that unemployment has continued to trend downwards in early 2004. There has also a welcome increase in the quality of jobs created, almost 80% of the additional jobs created during 2003 were full-time. Increases in employment have occurred in most parts of the private sector. And while employment levels continued to fall in manufacturing, even this sector is showing signs that it is responding positively to the economic upturn.
The labour force increased by over 2.5% in the twelve months to end-2003, as compared with an increase of 1.5% in 2002. The stronger growth reflects continued immigration and increasing labour force participation. Despite the restrictions placed on the work permit system in 2003, the number of work permit holders from outside the EEA continued to increase through 2003 and into the first quarter of 2004. Increased participation was most notably among women aged over 45. The most recent indicators suggest continued strong demand for labour, with the number of job ads and apprenticeship starts both up in the first quarter of this year. Earnings growth has, however, moderated from an annual rate of 10% in 2002 to an estimated 5% last year. Nevertheless, labour demand has still been strong enough to sustain earnings increases above the EU average, even in the manufacturing sector where employment has fallen.
Commentators are expecting the increased momentum of economic activity seen towards the end of 2003 to be sustained in 2004 with GNP forecast to rise by about 3.5%.Consequently labour demand should remain strong through the year. Employment growth should be strongest in private services as the sector responds to the pick up in economic activity. Public sector employment levels, on the other hand, are expected to fall this year in line with stated government policy. However, even allowing for a flattening of the public sector jobs growth, strong consumer demand should lead to a 2% rise in services employment this year. While an increase in employment in the modern manufacturing sector is envisaged, reversing recent declines, employment in the more labour-intensive traditional manufacturing sector is expected to continue to decline. Further increases in construction employment are expected as 2004 looks like being another record year for house completions. Overall employment in industry (including construction) is expected to rise by 1% in 2004.
We expect the unemployment rate to remain below last year’s levels, averaging 4.7% for the year. On an ILO basis unemployment is expected to average about 90,000 during 2004. Given that unemployment is expected to remain low, immigration is expected to continue to be an important source of labour supply to the Irish economy. Most of our foreign labour supply is likely to sourced from within the enlarged EU.
Over the medium term, employment is expected to rise by 234,000 between 2003 and 2010. All of this jobs growth is expected to be in the services sector, manufacturing employment is expected to be broadly static, while the numbers employed in agriculture and construction are forecast to decline by 19,000 and 15,000 respectively. The decline in construction reflects the expected fall in housing completions down from its current exceptionally high levels. Within the services sector, jobs growth is likely to be particularly concentrated in high-skilled areas such as banking & insurance, internationally traded services, and health & education. Employment in the hi-tech sector is anticipated to increase from 142,000 in 2003 to 158,000 in 2010. Overall, 78% of new jobs generated between 2003 and 2010 are expected to be in high-skilled areas.