Showing posts with label Irish demographics. Show all posts
Showing posts with label Irish demographics. Show all posts

Sunday, March 25, 2018

24/3/18: Dysfunctional Labour Markets? Ireland’s Activity Rates 2007-2016


Having posted previously on the continued problem of low labour force participation rates in Ireland, here is another piece of supporting evidence that the recovery in unemployment figures has been masking some pretty disturbing underlying trends. The following chart shows labour force Activity Rates reported by Eurostat:


Note: per Eurostat: "According to the definitions of the International Labour Organisation (ILO) the activity rate is the percentage of economically active population aged 15-64 on the total population of the same age group."

Ireland’s showing is pretty poor across the board. At the end of 2016, Irish labour force activity rate stood at 69.3%, or 16th lowest in the EU. For Nordic countries, members of the EU, the rate stood at 71.2, while for Norway, Switzerland and Iceland, the average rate was 78.2.

Over time, compared to 2007-2008 average, Irish activity rate was still down 1.6 percentage points in 2016. In the Euro area, the movement was up 2 percentage points. Of all EU countries, only two: Cyprus and Finland, posted decreases in 2016 activity rates compared to 2007-2008 average.

For an economy with no pressing ageing concerns, Ireland has a labour market that appears to be dysfunctionally out of touch with realities of the modern economy. In part, this reflects a positive fact: Ireland sports high rates of younger adults in-education, helped by our healthy demographics. However, given the structure of Irish migration (especially net immigration of the younger skilled workers into Ireland) and given sky-high rates of disability claims in Ireland, the low activity rate also reflects low level of labour force participation. In this context, younger demographic make up of the country stands in stark contradiction to this factor.

According to Census 2016, "There was a total of 643,131 people with a disability in April 2016 accounting for 13.5 per cent of the population; this represented an increase of 47,796 persons on the 2011 figure of 595,335 when it accounted for 13.0 per cent of the population." (Source: http://www.cso.ie/en/media/csoie/newsevents/documents/census2016summaryresultspart2/Census_2016_Summary_Results_%E2%80%93_Part_2.pdf) However, "Of the total 643,131 persons with a disability 130,067 were at work, accounting for 6.5 per cent of the workforce. Among those aged 25-34, almost half (47.8%) were at work whereas by age 55 to 64 only 25 per cent of those with a disability were at work." Another potential driver of low economic activity rate in Ireland is the structure of long term care within the healthcare (or rather effective non-existent structure of such care), pushing large number of the Irish people of working age into provision of care for the long-term ill relatives.

Here is the OECD data (for 2016) on labour force participation rates:

Source: https://data.oecd.org/emp/labour-force-participation-rate.htm.

Monday, September 23, 2013

23/9/2013: Sunday Times 08/09/2013: Irish Demographic Dividend Reversal

This is an unedited version of my Sunday Times article from September 8, 2013.


Back in the heady days of the Celtic Tiger, Irish economics commentariat and banks experts were extolling the virtues of Ireland's 'demographic dividend'.  A confluence of high birth rates, declining mortality and robust inward migration was propelling Ireland toward perpetually rising population counts. With these, the argument went, Ireland faced the ever-lasting expansion of domestic demand and labour supply.

Less than a decade later, the dividend has all but vanished in the maelstrom of rampant emigration. More ominously, as the latest trends suggest emigration is now reaching well beyond the traditionally at-risk sub-categories of the recent newcomers to Ireland and the long-term unemployed. Instead, outflows of professionals and middle-class families are now also on the rise.


Cutting across this nirvana of consensus permeating the Irish society around 2004-2006, few dared to suggest that something major was amiss in the aforementioned theory. Yet, the risks to Ireland's 'demographic dividend' were visible even at the time of the boom. At the peak of the Celtic Tiger and since the beginning of the Great Recession, I wrote about them in Irish media, including in these very pages. The first threat to our long-term population trends even in 2004-2006 period related to the risk of a structural economic slowdown. The second one came from the demographic ageing of the core European states and the resulting inevitable rise in wages premium for younger workers in these economies.

With the onset of the Great Recession, increased job markets uncertainty and declining disposable incomes have acted to boost Ireland’s birth rates, seemingly supporting the argument of some analysts that the demographic dividend was still alive and well then. In 1995-2007, there were 56,423 annual births on average in the Republic. In 2008-2009 average annual number of births stood at 74,183. Changes in the incentives for having children offered by the Great Recession were clearly the factor pushing fertility up. Alas, the latest data covering the twelve months through April 2013 shows that this process is now exhausted with 2013 births counts down 8.7 percent on 2010 peak.

Offsetting the initial rise in births, the Great Recession pushed Ireland back into becoming a net emigration nation once again, for the first time since 1995. Data published by the CSO last week shows that in 12 months through April 2013, total of 89,000 people have left the country. This is the highest number since the records started in 1987. There was a small increase in immigration driven primarily by importation of specialist foreign workers by the booming ICT and IFSC sectors, plus the return of students working on 1 and 2-year visas abroad. Despite this, 2013 marks the fourth consecutive year of net emigration.

Current rates of emigration are running ahead of the 1987-1995 period average. Back then, net emigration from Ireland averaged 14,811 per annum. Over the last four years, the average net outflow of people from this country stood at 30,600 annually.

The twin squeeze of declining birth rates and strong net emigration has resulted in 2013 posting the weakest overall population changes in 23 years. In 12 months through April 2013, Irish population grew estimated 7,700 - one seventh of the annual average for the 1991-2007 period. This brings us dangerously close to a rerun of the 1980s-styled demographic collapse when Irish population actually declined in three years through 1990.

Truth be told, we are probably caught in this 'back to the future' demographic warp already.

Our official statistics show inflow of 29,400 immigrants, excluding the returning Irish nationals and the immigrants from the Accession states, in the 12 months through April 2013. Majority of these are likely to be foreign workers brought into the country temporarily by the MNCs. Moreover, the current CSO estimates are based on PPS numbers, foreign visas issuance, as well as household surveys. These methods are potentially underestimating the numbers of those Irish nationals who have left the country, but still have close family remaining here. Last, but not least, our data is probably also underestimating outflows of the EU12 Accession states’ nationals.

Controlling for the above factors, it is highly likely that we are already experiencing a reversal of the ‘demographic dividend’ and the onset of the zero-to-negative population growth in Ireland since 2011. This has meant that our population today is some 436,000 below where it would have been if the trend established between 2000 and 2007 were to continue.


Ireland's emigration flows and population changes by age and nationality are retracing the structural collapse of our economy: the story of our paralysed and polarised society burdened by debts, taxes, unemployment, lack of opportunities for career advancement and fear for the future.

From 2010 through 2013, the numbers of Irish nationals opting to leave the country net of those returning from abroad have been rising steadily. The net outflow of Irish nationals more than tripled between 2010 and 2013. If between 2006 and 2008, some 32,100 more Irish people returned home than left Ireland, over the subsequent 5 years, 90,700 more Irish people emigrated from the island than moved here.

In addition to the above, there are some new undertones that are emerging in the data over the last two years.

Official data on population breakdown by age groups shows that the bulk of population declines over the crisis in Ireland took place in the 15-29 year olds cohorts. However, since 2011, the 30-39 year olds cohort is also posting declining numbers. These age-related trends are now pushing us toward twin age dependency scenario where the numbers of old age-dependent residents and young age-dependents peak at the same time. Top productivity cohorts - ages 34-54 - grew by 124,000 since 2007, while old and young age dependents cohorts are up 203,600 over the same period of time. Working age cohorts (20 years of age through 64 years of age) accounted for 62.4 percent of Irish population in 2007. This year the ratio is 59.7 percent.

Compared against the age distribution of the unemployment, the latest trends suggest that jobs losses are no longer the sole drivers of emigration. Instead, it appears that emigration is increasingly afflicting those groups of population that are generally more secure in their jobs. The potential reasons for this are household debt overhang and lack of promotional opportunities open to the younger workers here.

While the numbers of emigrants between 15 and 24 years of age remained basically unchanged over 2011-2013 period, the numbers of emigrants between 25 and 44 years of age rose by a third. With this, there was a corresponding rise in families relocating abroad.

With banks starting to move more aggressively against distressed borrowers, these sub-trends are likely to strengthen over time.

Economic and social losses arising from debt crisis are also likely to increase as migrants due to debt and/or career considerations are more likely to carry with them above average skills, productivity and earning potential. In addition, these migrants are less likely to return to Ireland, especially if the debt they leave behind remains on the record against their names.


The impact of the current wave of emigration on our society and economy is likely to be more long lasting than that of the previous emigration waves. This conjecture is supported by a number of considerations.

Today’s emigrants are conditioned by their education, past employment experiences and social values systems to accept the mobile nature of their future careers. In other words, having left Ireland they are unlikely to look back at their homeland as a natural home. Increasingly, Irish emigrants are setting their sights on geographies that are more remote from Ireland than the UK and continental Europe. This puts more stress on their ties to Ireland. The latest data showing that emigrants to countries like Australia, New Zealand and Canada tend to show lower returns in recent years. In addition, debt legacy will hold many of them back from returning to Ireland in the future. Age-related considerations with further reinforce this effect, with many emigrants in their mid-30s and 40s today facing a prospect of never again being able to secure a mortgage in Ireland were they to attempt a comeback. Lastly, a major factor in today’s emigration from Ireland is that it involves greater proportion of emigrants who enter their host destinations legally, thus increasing their chances at future naturalisation.

Overall, CSO data confirms the above observations, as fewer and fewer Irish nationals are today returning back home.


Far from being a solution to our economic woes or a temporary safety valve for the economy saddled with high levels of unemployment, current wave of emigration from Ireland is undermining the prospects of economic recovery here. More crucially, by removing more politically and socially disenchanted and activist younger people and families, the emigration is acting to mute the voices of dissent here. With them, the raison d’etre for the robust political, social and economic changes is slipping away too.





BOX-OUT:

Markit-Investec Purchasing Manager Indices for Irish Manufacturing and Services have both posted significant gains in August, compared to July. August PMI for Manufacturing came in at 52.0, showing the fastest pace of economic activity growth for the sector since November 2012. Meanwhile, Services PMI reading of 61.6 was the highest since February 2007. Both indices are subject to significant distortions from the multinational companies based here. However, Services PMI is subject to more severe skews due to the tax arbitrage activities by companies operating in international financial services, ICT services and auxiliary business support services. Nonetheless, caveats aside, the latest data strongly suggests that Ireland has moved out of the triple-dip recession in Q3 2013 and will post growth in GDP for the three months through September. Aside from this, however, the PMIs continue to signal relative weakness in the domestic sectors compared to exports and employment growth signals have weakened in both sectors of the economy. Finally, additional good news were signaled by the improved profit margins in Services, now third month running and marking the first sustained upward momentum in profits in five years. This, however, was not the case in Manufacturing, where input costs rose against basically unchanged output prices.

Thursday, September 12, 2013

12/9/2013: Actual v Potential Emigration from Ireland

In recent weeks, I have seen a number of figures mentioned relating to the extent of emigration from Ireland over the recent years, ranging from 300,000 to 400,000 emigrants. Here is the summary of the data:


Actual levels of Emigration from 2009 through 2013 stand at 397,900 cumulative emigrants. Actual recorded Net Emigration from Ireland over that period stands at 120,800.

Taking into the account the trends for inward and outward migration from 2000 through 2007, Net Emigration reflective of pre-crisis trend stands at around 436,700. This number, however, assumes that the trend for inward inflow of people into the country as well as the trend for outward outflow of people from the country established over 2000-2007 were to continue into 2009-2013 period as well. As such, this number (loosely) represents the potential loss of population due to rising emigration and reduced immigration. Most of this effect is driven by reduction in the inflows of people into the country relative to trend.

While the last number is only indicative and an estimate, it does show that the true demographic cost of the crisis to Ireland is in the region of 436,700 fewer residents in this economy than could have been expected under the pre-crisis trends.

Sunday, September 8, 2013

8/9/2013: Dublin's 'burgeoning' workforce attracts MNCs? Err... what?..

A quick post. Recent research note from one of the highly regarded property research outfits in Ireland cited the following sources of Ireland's success in attracting nine out of ten largest tech companies to Dublin: "low corporation tax rates and a burgeoning workforce which is young, educated and English speaking." This references not some abstract period of, say, 'since 1990' or even 'since 2000', but the last few years, as the argument is then carried over as a reason / a causal explanation for the reported boom in prime office rents in Dublin in H1 2013.

While I do not want to pick any fights over anything, least of all the 'young' bit (read my Sunday Times column from today on 'demographic dividend') or 'educated' part (see my view of our education system and skills/human capital on this blog) or 'English speaking' (slightly ironic, given tech employers are complaining about the lack of foreign languages skills availability in Dublin), I wonder what this 'burgeoning workforce' references.

Here is data from CSO on Dublin's workforce for Q2 (or H1) in every year on record: 


Can you spot 'burgeoning'? In Q2 2013, there were 555,100 persons aged over 15 in employment in Dublin region. This represents second lowest level of employment (after Q2 2012 when the number was only 7,700 lower at 547,400) since Q2 2004. In other words, our workforce 'burgeoned' into a 10-year slump in terms of employment.

Now, in terms of labour force numbers, in Q2 2013 there were 630,500 in labour force in Dublin. This marked an increase of only 6,200 on Q2 2012 and marked the second lowest level reading since Q2 2006. With all the positive demographics and the tech sector boom cited by the property researchers, the burgeoning we might have experienced in labour force levels terms was consistent with the hitting a 7-year slump. Slightly more 'burgeoning' than employment figures, but still not exactly exciting enough to stir any tech companies rushing into Dublin.


Note: I reference two numbers in relation to the 'workforce' term: labour force and employment. The latter measures those who currently work, the former includes the latter, plus the unemployed, excluding  those in education and training. I seriously doubt US tech giants are coming here for the pool of the unemployed. Which means that the 'workforce' that can be expected to be strongly positively correlated with incentives for the MNCs to locate here would be measured by employment figures, not by general labour force ones.

Friday, June 26, 2009

Economics 26/06/2009: EU growth, Planning Permissions & QNHS

Eurocoin is out again and it is time to update our forecasts for Euroarea growth. First a note - Eurocoin have revised their past numbers in line with new methodology.
Note that above I use upper range forecast for July Eurocoin of -0.52 and implied GDP growth forecast of -2.1% for Q2 2009. Lower range forecast for the indicator is -0.91 and for GDP growth of -2.5%. Thus, I see an even chance of renewed deterioration in growth conditions in the Euroarea into mid Summer.


CSO Planning Permissions data Q1 2009: planning permissions were granted for 14,177 dwelling units, compared with 18,582 units for the same period in 2008, a decrease of 23.7%. Planning Permissions were granted for 10,256 houses in Q1 2009 and 13,301 a year earlier, a decrease of 22.9%. Planning permissions were granted for 3,921 apartment units,
compared with 5,281 units for the same period in 2008, down 25.8%. One-off houses accounted for 19.3% of all new dwelling units granted planning permission in this quarter. The total number of planning permissions granted for all developments was 7,486. This compares with 11,055 in Q1 2008, a decrease of 32.3%. Total floor area planned was 3,419 thousand sq. metres in Q1 2009. Of this, 61.1% was for new dwellings, 25.4% for other new constructions and 13.4% for extensions. The total floor area planned decreased by 24.3% in comparison with the same quarter of 2008.

Illustrated:
Total annual permissions are down, Q1 permissions trending down as well, especially for dwellings.Total floor area down, but by less.
As average floor area per unit is rising along established trends - delivering value for money is tighter markets?The trend for better quality and smaller quantity is evident, which should improve performance for better builders, but pressure the profit margins. One area of concern is that the authorities are not granting higher density permissions, implying that per existent acre of site, cost of building is up, further reducing margins.
Track homes are not exactly popular, while
one-off houses are even less so. That said - square footage is also rising for one-off dwellings as, presumably, rural Ireland decided to spread out in the recession (those CAP payments are still rolling in?).
No such luck for apartments buyers, but they do have some nicer square footage to go by, as sales stagnated and developers need more goodies for money to close on new units. We can expect Ken 'The Merciless' MacDonald to start writing lengthy articles telling us that NOW IS THE TIME TO BUY one of his apartments, as RETURN OF CAPITAL APPRECIATION IS IMMINENT... Beware of the merchant...


Quarterly National Household Survey was out earlier in the week.

In Q1 2009 there were 1,965,600 persons in employment, an annual decrease of 158,500 or 7.5%. This compares with an annual decrease in employment of 3.9% in Q4 2008 and growth of 1.7% in the year to Q1 2008. There was an annual decrease of 122,200 or 10.2% in the number of men in employment, while the number of women in employment decreased by 36,300 or 3.9%.

The overall employment rate among persons aged 15-64 fell to 63.2%, down from 68.4% in Q1 2008. This brings the employment rate back to a level comparable to that recorded in Q1 1999, thus erasing all the demographic and migration benefits accruing to Ireland in the last 10 years.

Full-time employment decreased by 176,200 over the year, part-time employment increased by 17,700, with 14,700 of the increase attributable to males and 2,900 to females. Recalling that even before the current crisis Ireland was creating predominantly part-time jobs, we are now facing seriously adverse quality of employment conditions in the country.

There were 222,800 persons unemployed in Q1 2009, an increase of 113,400 (+103.7%) in the year. Male unemployment increased by 85,300 (+116.7%), with the number of unemployed females increasing by 28,200 (+77.7%). The seasonally adjusted unemployment rate increased from 8.1% to 10.2% over the quarter and from 4.9% over the year - the highest level since 1997. Seasonally adjusted, the male and female unemployment rates stood at 12.5% and 7.0% respectively. The long-term unemployment rate was 2.2% in Q1 2009 compared to a rate of 1.3% in Q1 2008.

Now, some illustrations:
Employment is folding everywhere, except for personal protection services. wait another few months and a new emergency rip-off Budget, and guarding our unpopular Government will be the boom sector...
Average hours worked down, short-term work up, contractors work down. And in more details:
Bad employment up, good employment down. But public sector is not feeling the heat:

Regionally - all the subsidies to waste, the same black spots of unemployment remain:Border, Midlands, Mid-West and South-East are all bad performers in unemployment terms in the boom days of 2007. Ditto today. A new entry - casualty of the downturn - is the West. Doubtless, there will be calls for new tax on Dublin to pay welfare rolls wages out in our Gateways to Excellence Regions... But look at participation rates:
Collapsing across the state. Note Border and Midlands - dramatic fold down in participation rates - driven by, most likely an exodus of younger workers from Dublin and other areas' construction sites... No wonder I heard Midlands referred to as our Little Poland (Lithuania, etc).

And finally - my favourite topic - demographic dividend...
Note that as of Q1 2009, unemployment rate among 15-19 yo males was 33%! We are indeed wasting our young to protect job security of our public sector middle-aged and elderly...

Thursday, March 19, 2009

Daily economics update 19/03/2009

Excellent piece on Irish Nationwide excesses here - I would certainly encourage everyone to read through it.


On the news front -

Ireland:
Per CSO (here): the number of overseas trips by Irish residents fell by 8.4% to 502,100 in January 2009 compared to the 548,400 a year ago. Brian^2+Mary's tax on travel and recession biting. And euro's steady rise has taken a bite out of travel to Ireland too: there were 424,200 overseas trips to Ireland in January 2009 - down ca3% on 2008. "Visits by residents of Great Britain accounted for virtually all of this decrease, falling by almost 16,000 (7%) to 208,300." Needless to say - this is costing this country. Visits by residents of Other Europe and North America recorded slight increases to 149,500 and 45,200 respectively. No breakdown on vitally important length of stay and locations visited by foreign tourists here was made available. The crucial point missing here is just how bad is it going to get for Irish hotels, located outside Dublin. In recent months, these palaces of rural kitsch built on the back of senile tax breaks to developers, courtesy (in part) of Brian Cowen in his tenure as Minister for Finance, have been popping out of business like flies in late autumn.

Also courtesy of CSO:
Monthly factory gate prices increased by 0.9% in February 2009, as compared with an 0.2% rise recorded a year ago, the annual increase of 3.9% in February 2009, compared with and annual rate of growth of 3.2% in January 2009. Inflation cometh? Well, possibly. In the year the price index for export sales was up 4.3% while the price index for home sales was up 1.7%.

Wholesale price changes by sector of use shows that: Building and Construction All material prices decreased by 1.2% in the year since February 2008 (surprisingly, very small deflation in the face of all but collapsed construction), and there were increases in Cement (+8.0%), and Stone, sand and gravel (+4.8%). At least Sean Quinn can always go back to mining boulders. Year on year, the price of Capital Goods decreased by 0.1%, and the rate is accelerating to -0.4% last month. The price of Energy products increased by 5.2% in the year since February
2008, while Petroleum fuels decreased by 17.9%. So ESB and Board Gais are still ripping us off, while teh Government is fast asleep. In February 2009, there was a monthly increase in Energy products of 0.4%, while Petroleum fuels increased by 1.6%.

But hey, the good news is that we are now in a 'breeding boom'. According to the CSO, there were 19,027 births registered in Q2 2008, an increase of 1,900 on 2007. Q2 2008 total is 40% higher than in 1999. "This represents an annual birth rate of 17.2 per 1,000 of the population, 1.4 above quarter 2 of 2007. This rate is 2.7 per 1,000 population higher than in
1999."

Incidentally, the latest US data shows that the country population is also booming. The preliminary estimate of births in 2007 rose 1% to 4,317,119, the highest number of births ever registered for the US. The general fertility rate increased also by 1% in 2007, to 69.5 births per 1,000 women aged 15–44 years, the highest level since 1990.

Clearly a good sign for Brian^2+Mary, who can now rest asured that Irish families are producing more future taxpayers for the Government to continue ripping off ordinary families. The bright future is at hand at last for public sector wages and pensions.


US:
There are some signs of longer-term lead indicators revival in the US. Much has been said about housing starts bottoming out and the fact that these are only long-term lead indicators for house prices (see here).

Unemployment - new claims have fallen by 12,000 to 646,000 in t he week ending March 14, while the numbers collecting unemployment benefits rose by 185,000 to a record seasonally adjusted 5.47 million by March 7th. The four-week average of new claims also rose by 3,750 to 654,750, the highest level in 26 years. Still, at least some things are starting to move in the right direction.

In the mean time, General Electric said it now expects GE Capital Finance unit to be profitable in Q1 and for the full year 2009. This follows a recent $9.5bn injection of capital by the parent. This, if holds through the year, is good news, as GEFC has been at the forefront of writing dodgy loans and mortgages to distressed consumers in 2005-2007.

Of course, Wednesday data was also showing some signs of the bottoming in the US recessionary dynamics. US consumer prices increased a seasonally adjusted 0.4% in February, primarily on the back of a 3.3% rise in energy costs (8.3% rise in gasoline prices). Food prices fell 0.1% in the first decline since mid 2007. Core CPI (ex Food and Energy) was up 0.2% - a nice range signaling possible end of deflation.

This is not to say that the current rallies are sustainable. So far, we are starting to see some early stage recovery indicators attempting to find the floor. It will take couple of months for them to start turning. But the markets will remain bearish until the second stage indicators start flashing upward turn-around. These are existent unemployment claims, construction indices, pick up in resale markets activity, PMIs etc. Until then, you'll have to be brave to wade out of the cash safety into individual equities.

And the latest news on the second stage indicators is poor. The index of leading economic indicators - designed to forecast economic activity 6-9 months ahead - fell 0.4% in February, following a gain of 0.1% in January 2009. Overall, 6 out of 10 indicators were up in February and 4 were down. According to Ian Shepherdson, chief economist with High Frequency Economics, "The trend remains clearly downwards, consistent with continued outright contraction in the economy."