Writing this time last year, I expected our economic fortunes to get better before they got worse. I saw clouds gathering on the distant horizon, but no major storms forecast for 2018.
*** This article was first published on thejournal.ie on 28 December 2018 ***
Ireland isn’t quite partying like it’s 2006, but the stats don’t lie – 2018 has been a bumper year by most measures.
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The economy generated nearly 1,300 extra jobs per week in the 12 monthsto end-September, up from less than 950 per week the previous year. Even if the pace of job growth slowed after the middle of 2018, this is still impressive progress by any measure, and enough to see the unemployment rate fall to 5.3% in November, down from 6.4% the previous year.
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Although this is close to what economists call ‘full employment’, it should be remembered that the share of the working age population making themselves available for work is still (62.6%) significantly lower than its 2007 peak (67.4%). This flatters the unemployment rate and suggests there are still some 300,000 people that could be enticed back to the workforce.
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Growth in average hourly earningshas picked up, from 2.1% a year ago to 3.2% now, more than double the growth rate from two years ago. The minimum wage will increase by 2.6% from New Year’s Day, from €9.55 an hour to €9.80.
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Only part of the increase in people’s pay packets is being eaten up by higher prices. Consumer prices are basically flat, edging up only slightly from 0.5% in November 2017, to 0.6% in the same month this year. This average hides important differences: the cost of housing, water, gas and electricity increased more than 5% on the year while the price of furniture and household equipment fell by more than -4%.
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This means real hourly wages are increasing in every sector with the exception of public administration, which clocked up only a 0.8% gain in the year to end-September.
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With more people at work earning higher wages, it is hardly surprising that we are spending more. Ireland’s GDP figures are heavily distorted by multinational activity, but the most unpolluted – and least volatile – component is private consumption which grew by 2.9% in the third quarter of the year compared to a year earlier.
