Second record high for Northern Ireland employment rate but future depends on Brexit

The latest Labour Force Survey shows a record 72.6 per cent of people in Northern Ireland are employed
Gary McDonald Business Editor

NORTHERN Ireland's employment rate has hit a record high for the second quarter in a row in the April-June period, with an all-time high in the employment rate (up 3.3 per cent to 72.2 per cent) and a historic low in economic inactivity (down to 25.5 per cent).

But the number of people claiming unemployment benefit has been on the rise since last summer (albeit from extremely low levels), showing a marginal increase of 0.2 percentage points relative to the previous 2019, although it is 0.6 per cent lower than the same period in 2018.

However, the economic outlook from both a Brexit and global perspective has darkened, and economists are warning that this, in time, will filter into the labour market.

"We have already seen some tentative signs of the labour market showing signs of weakening or at least coming off the boil," according to Ulster Bank's head number-cruncher Richard Ramsey.

"For example, the number of job vacancies has started to ease in quarter (from record highs), as evidenced in the latest jobs report, while private sector firms have reduced their staffing levels modestly in the last seven months to July, according to the Ulster Bank Northern Ireland PMI.

"The most closely watched indicator of the jobs market in Northern Ireland is the Quarterly Employment Survey (QES).

"Next month's release for Q2 is expected to reveal another record number of jobs. But the subsequent releases for Q3, due in December, and particularly Q4 (due next March) are expected to reveal a weakening in the labour market. This will follow an expected deterioration in economic output measured by Northern Ireland's Composite Economic Index from Q2."

Mr Ramsey added: "2020 is likely to be much more challenging for the local and national labour markets, so we should enjoy the record highs while they last."

Danske Bank chief economist Conor Lambe said the data painted another relatively positive picture of the local labour market, with the most eye-catching news being that the economic inactivity rate fell to the lowest rate on record (although it is still considerably higher than the UK average).

But he warned: “The threat of leaving the EU without a deal at the end of October remains the most significant risk facing our economy. If we are to build on the recent strong performance of the labour market, then it's vital that scenario is avoided.”

FSB regional policy chair Tina McKenzie said: “The persistent issue of economic inactivity is something which has long been a concern to policy makers in Northern Ireland so, given it is continuing to decline, albeit from very high levels, this will provide some comfort that progress is being made.

“However, there is still much that can be done to encourage more people to play a fuller role in the economy. More than a third of women who are economically inactive declare ‘caring for family or home' as the primary reason for their inactivity. Properly investing in childcare, allowing it to be more affordable and accessible, would enable parents to have more choice about the role they play within the economy.”

Martin Cowie, partner at PwC NI cautioned that while the trend of increased employment and falling economic inactivity is encouraging, it comes at a time when the UK economy is experiencing considerable turbulence.

He said: “The ongoing Brexit-related uncertainty continues to stall business investment, and combined with the economy shrinking in the second quarter of the year as well as a weakening global economy, we're left on a knife-edge ahead of October 31.

“The labour market remains highly dependent on what occurs over the next few weeks. Should the UK leave the EU with a deal, it will be positive for workers with local businesses able to move forward with investment plans. It would increase demand for labour which in turn would have a positive impact on wages.

“But if the UK leaves without a deal, the economy may receive a negative shock resulting in a range of other less positive outcomes for workers.”

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