Jobless rate in Ireland hits new post-crash low

Strong economy has driven unemployment in the Republic of Ireland to 11-year low. The strength of the Irish economy was underscored with new figures showing unemployment falling to a post-crash low of 5.1 per cent and stronger-than-expected exchequer returns putting the government on course to exceed budgetary targets.
The figures showed gross voted current expenditure was up 6 per cent at 27.5 billion euros on the same period last year, driven by a 9-per cent increase in health spending. “This merely illustrates the reality that the government has chosen to delay achieving a budget surplus, instead choosing to increase spending rapidly,” Davy analyst David McNamara said. He added: “This raises concern that expenditure discipline is being eroded in the high-spending departments.”
The State’s jobless rate for July was 5.1 per cent, meanwhile, the lowest recorded since October 2007, just prior to the global financial crisis. Unemployment has fallen more sharply than anticipated. In its recent Summer Economic Statement, the department had forecast an average rate of 5.8 per cent for this year, albeit before a substantial downwards revision by the Central Statistics Office in May.
The latest figures indicate the seasonally-adjusted number of people unemployed was 120,200 in June, down from 123,100 the previous month. On annual basis, unemployment has fallen by 34,300. It has fallen more than 10 per cent from its post-crisis peak of 15.9 per cent in December 2011. The turnaround means Ireland’s jobless rate is now 3 per cent lower than the euro zone average of 8.5 per cent.
The figures show the seasonally-adjusted unemployment rate for men was 5.1 per cent, down from 5.2 per cent in May and from 7.2 per cent in June 2017, and 5.2 per cent for women, down from 5.9 per cent a year ago. The rate of youth unemployment in June was 11.4 per cent, down from 11.8 per cent in the previous month.
The Economic and Social Research Institute estimates that an unemployment rate of 5 per cent is almost equivalent to full employment in the Republic. However, it fell to just under 4 per cent in 2001. Economist, Tara Sinclair said: “The unemployment rate is now below with where the Department of Finance forecast it would be next year, indicating that labour market growth is ahead of expectations.”
Meanwhile, corporation tax has driven strong exchequer returns. Another surge in corporation tax receipts in the first half of this year has put the government on course to exceed its budgetary targets for the year. While the stronger-than-expected performance, detailed in the latest exchequer returns, is expected to increase the clamour for tax cuts in the budget, it has renewed concern about the government’s increasing reliance on corporation tax, which now accounts for 16 per cent of the State’s total tax take.
According to the exchequer returns, the overrun in health spending is at 167 million euros, which is a major concern.
However, sources say that the underlying level of budget overrun is higher given that the health service also returned deficits last year. Official figures show that the level of spending is 600 million euros higher than last year.
The total health budget is over 15 billion euros this year.
The exchequer figures show the government collected just under 25 billion euros in taxes in the year to the end of June, which was 5 per cent up on last year and more than 168 million euros ahead of target. The strong performance was driven by corporation tax receipts, which brought in a record 4 billion euros for the six-month period, which was 9.1 per cent or 335 million euros above what the department had targeted. About 40 per cent of the revenue generated from corporation tax comes from just 10 firms. It is understood these include tax giants Apple, Microsoft, Dell, Google and Oracle.
The government has been warned repeatedly not to rely on current corporate tax growth to fund permanent spending measures given the uncertain outlook internationally. Ireland’s economy has been the best performing in the EU for the past three years, swelling the government’s tax take in the process.
The latest returns show income tax, the government’s largest tax stream, generated 9.6 billion euros, which was 1 per cent ahead of target for the period, reflecting the current strength of the labour market.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)