Housing not choking off capital jobs boom — yet
THE economy is in a sweet spot. It’s still lean after the shakeout of recession years and it is benefiting from benign international conditions. Despite all the uncertainties out there, the latest growth figures from the UK and the US are robust, while a soft patch in the euro area is probably just that, and not a sign of incipient recession.
So what is driving Irish economic growth, which sectors are doing well and which ones are likely to do well in the future? The best indicator of what is happening sectorally, and indeed on an economy-wide basis, is the quarterly jobs statistics. The latest batch were delivered by the State’s number crunchers last Tuesday.
They show an economy that has been cooling a little recently, the quarter-on-quarter rate of job creation — adjusted for seasonal ups and downs — decelerated from a very strong 1.1pc at the end of last year to a more modest 0.5pc in the third quarter of this year.
This deceleration, however, need not cause sleeplessness. Other economic indicators are not pointing to an end of the growth phase of the current business cycle. As such, the recent slowdown in job creation is unlikely to herald the onset of a slump, or something worse.
With the macro picture broadly benign, let’s turn to the economy’s thriving industries. Sectorally, the latest (third-quarter) job figures were broadly consistent with recent trends.
The fastest-growing industries continue to be construction, hospitality, technology and back-office businesses. Possibly reflecting the growth of ecommerce, there has also been a more recent surge in the transportation and storage sector. Consider each one of these in turn. It has been the case for some time, the construction sector is leading the pack when it comes to hiring.
Builders are taking people on to beat the band. The number at work in the industry grew by a eye-widening 14pc in the 12 months to the third quarter (all figures cited here are seasonally adjusted).
Headcount is now back at levels recorded in the immediate pre-bubble period in the early 2000s.
Much of the growth has come from the non-residential side of the industry, which is booming.
With the homebuilding sector ramping up rapidly, further strong growth can be expected, barring a shock to the economy from Brexit or one of a number of other big risks looming on the horizon.
Those worrying that another boombust cycle is ongoing can take solace in the fact that there are still almost 100,000 fewer workers in the sector that at the peak of the property frenzy more than a decade ago.
Moreover, as a percentage of total employment in the Irish economy, construction accounted for 6.4pc in the third quarter, down from 11pc in 2007, and is not out of line with historical norms in developed countries.
One driver of the construction sector has been an increase in hotel-building to satisfy the booming demand for accommodation, as ever-growing hordes of tourists flock into the country.
The hospitality sector continues to be second only to construction in the employment growth stakes.
The number of jobs in accommodation, restaurants and the like hit 180,000 in the third quarter, more than 10pc higher than a year earlier.
That represents a sharp acceleration in the already strong growth over the previous few years.
It’s also worth noting that the hospitality industry is one of the few which has far surpassed it’s previous, pre-crash peek. Employment in the sector is up by a quarter on 2007-08 levels.
How an industry which has been doing so well got preferential Vat treatment for so long is testament to just one thing: the power of lobby groups in Ireland.
If the wider economy is not hit by external shocks over the next year, it will be interesting to see what those in the industry who warned that a higher Vat rate would be disastrous for the sector will say in their next pre-budget submissions.
The third of the star performing sectors is humdrum administration and assorted support services in the private sector.
Those who were once called ‘paper pushers’ numbered more than 100,000 in the third quarter, up a phenomenal 14pc year on year.
Since the recovery began six years ago, their number has grown by third.
Those who talk at business conferences about how automation and artificial intelligence are doing away with administrative jobs should check the employment data.
Just as the warnings over decades that technological change would lead to mass unemployment, current predictions about job-destroying technology are also likely to be proved wrong.
Speaking of technology, the IT sector continues to go from strength to strength, even if its growth has been less spectacular than general chatter might suggest. Employment in the industry rose by almost 6pc year-on-year in the third quarter to stand at 123,000.
Like its less glamorous counterpart — administration — it has also grown by a third since the economy started its current growth phase in 2012.
Given the amount of new investment and innovation in the tech sector, there is every reason to believe that it will go on growing in the quarters and years ahead.
Another sector that is on the up is transportation and storage.
Growth in employment has accelerated over the past year or so, bringing the numbers at work past the 100,000 threshold for the first time ever.
This is likely to reflect changes in the way we consume, with more online purchases and fewer shop-bought goods and services. That, in turn, is reflected in the numbers working in retail and wholesale, which are 40,000 below a decade ago and showing no real sign of growth.
A final, non-sectoral point jumps out of recent Labour Force Surveys.
Despite a huge amount of discussion of housing shortages in the capital and the implications of too few homes for the continued advance of Dublin, employment growth has accelerated since the middle of last year.
In the just past 12 months the number of people working in the capital has grown by 5pc, or 33,000 people.
Some of the additional workers have come from the ranks of the unemployed, people who, presumably, would already have been housed.
But the data shows that the vast majority of the increase was driven by more people crowding into the city.
Housing supply is certainly a problem, but the jobs numbers show that it is not choking off the capital’s continued boom — for now at least.