The Two Irish Economies

The following graph illustrates the destruction of employment that has occurred in the Irish labour market since the middle of 2007.

Employment in Ireland peaked in Q4 2007 when 2,138,800 people had jobs.  Since then there has been a 12.6% reduction in the number employed with a reduction of 270,200 to 1,868,600.

Here are two contrasting images of jobs performance in the Irish Economy.

Amazing as it may appear these are two halves of the Irish labour market over the same time period.  One shows a steady rise for three years followed by some consolidation.  The other shows the same rise but then drops down at an alarming rate.

In fact for the first three and a half years of the time period this split evenly divided the numbers employed in the Irish labour force.  A graph overlapping the two series can be seen here.

At the time of peak employment in Q4 2007 (and the beginning of the split in the series) the economy in the left image (call it Economy One) had 1,082,600 employed and the economy in the right image (Economy Two) had 1,055,100 employed – a difference of only 27,500 or 2.5%.

The most recent Quarterly National Household Survey (QNHS) for Q1 2010 tells us that Economy One had actually added a small number of jobs with total employment standing at 1,086,000, an increase of some 3,400 jobs.  On the other hand Economy Two has seen employment destruction on a vast scale with 271,300 jobs lost or 25.7% of the total, bringing the numbers employed down to 783,800.

So what is the divide between these two economies that has seen one show steady employment during the recession, with the other losing more than one in four of all jobs?  The division comes from the 13 sectors included in the QNHS employment data based on the NACE classifications. 

Here is the composition of the two economies.

Economy One (GOOD)	Economy Two (BAD)
Transportation and storage (H)	Agriculture, forestry and fishing (A)
Accommodation and food service activities (I)	Industry (B to E)
Information and communication (J)	Construction (F)
Financial, insurance and real estate activities (K,L)	Wholesale and retail trade, repair of motor vehicles and motorcycles (G)
Professional, scientific and technical activities (M)	Public administration and defence, compulsory social security (O)
Administrative and support service activities (N)
Education (P)
Human health and social work activities (Q)
Other NACE activities (R to U)

The sectors in the left column have either added employment or seen the numbers employed fall by less than 10%.  The distinguishing feature of the five sectors on the right is that they have seen number employed fall by more than 10% since the employment peak of Q4 2007. 

So while it is true to say that Ireland has been going through a deep recession, from an employment numbers perspective it has been a half-recession with the loss of jobs limited to half of the economy (1 in 4 jobs lost) with the other half relatively unaffected (and actually adding a small number of jobs). Tweet