The strength of the Irish economy was underscored on Tuesday with new figures showing unemployment falling to another post-crash low of 5.1 per cent and stronger-than-expected exchequer returns putting the Government on course to exceed its budgetary targets for the year.
The exchequer numbers point to buoyant tax revenues with the Government collecting just under €25 billion in taxes during the first six months of the year. This was 5.4 per cent up on last year, but also €168 million more than the Department of Finance had targeted.
However, the rapid increases in public expenditure, most notably in the area of health, is now a major concern. The figures showed gross voted current expenditure was up 6 per cent at €27.5 billion on the same period last year, driven in the main 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. “This raises concerns that expenditure discipline is being eroded in the high-spending departments,” he added. The State’s jobless rate for June at 5.1 per cent, meanwhile, was the lowest jobless rate recorded in the Republic since October 2007 just prior to the financial crisis. Unemployment has fallen more sharply than the department anticipated.
In its recent Summer Economic Statement, the department had forecast an average rate of 5.8 per cent for 2018, albeit this was before a substantial downwards revision by the Central Statistics Office in May. The latest official figures indicate the seasonally-adjusted number of persons unemployed was 120,200 in June, down from 123,100 the previous month. On annual basis, unemployment has fallen by 34,300. Unemployment has fallen by 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 woman, 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 May. 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.
“The unemployment rate is now below with where the Department of Finance forecast it would be at next year, indicating that labour market growth is ahead of expectations,” according to Tara Sinclair, economist with recruitment website Indeed. “Indeed research shows that the pace of hiring activity in Ireland is intensifying, with sectors like construction, hospitality and finance amongst those increasing their efforts to hire more staff,” she said. Ms Sinclair also noted that the tighter labour market was already feeding into higher wages, and that this trend was likely to continue.