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Irish unemployment revisions suggest more labor market slack

Published 12/05/2017, 10:52 AM
Updated 12/05/2017, 11:00 AM
© Reuters.  Irish unemployment revisions suggest more labor market slack

By Padraic Halpin

DUBLIN (Reuters) - Ireland's unemployment rate has been higher in recent years than previously thought, the state statistics office said on Tuesday, flagging further revisions that suggest there is still some slack left in the fast-growing economy.

The unemployment rate fell to 6.1 percent in November from 6.3 percent in October but that compared to an initial estimate of 6 percent last month as the entire series was revised following the introduction of a new labor force survey.

The revisions showed that the number of people out of work peaked at 15.9 percent in late 2011, when Ireland was working its way through a three-year international bailout, rather than the 15.1 percent initially thought.

The Central Statistics Office said the new estimates were still preliminary and will be further revised next month.

Analysts at Davy Stockbrokers said that could imply big changes to the jobless rate as it will include migration trends from 2011 that were more positive than previously estimated.

"The unexpected inward migration flows captured in Census 2016 mean that the labor force numbers will have to be significantly revised," Davy's David McNamara wrote in a note.

"Recent commentary suggesting that the Irish economy is now close to full employment is, in our view, wide of the mark."

Ireland's economy is set to grow faster than any other in Europe for the fourth year running, prompting policymakers to warn that it could overheat in the coming years if falling unemployment leads to excessive price and wage pressures.

Inflation has remained largely flat over that period, however, while data last week showed wages grew 1.7 percent year-on-year in the third quarter, down from 2.2 percent in the previous three months.

Research by two central bank economists in August also showed that the labor market had more spare capacity than official jobless numbers indicate, suggesting there was the potential for further falls before major wage pressures emerge.

Davy's economist McNamara also said that, at 4.5 percent below pre-crisis levels, the employment rate was still "a long way off" its 2007 peak and that the participation rate had a similar way to go.

"Taking this broad range of indicators into account suggests that the recovery has further to run," McNamara said.

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