Ireland can mirror the US with bumper jobs growth

David Chance

Ambitious: US President Joe Biden is to invest heavily in infrastructure. Photo: Yuri Gripas / Bloomberg

April 08 2021 02:30 AM

First the good news – the doubling of US hirings in March tells us that once vaccinations have gathered pace and economies reopen, there is a real chance of a rapid recovery, perhaps even a V-shaped one.

The US added 916,000 jobs last month, the most since August, and talk is now of the biggest American economic expansion since the 1960s, underpinned by an ambitious infrastructure package from President Joe Biden.

That reopening path points the way for Ireland, once the slow pace of vaccinations here does finally pick up. It also highlights some of the hurdles we will face once lift-off finally comes.

The time to worry is when the Government says ‘job done’.

First off, you are only getting those red hot job numbers because of the depth of the sudden shock recession caused by the coronavirus. They need to be looked at in the context of March 2020 when payrolls contracted by 1.7 million, followed by the disappearance of 20.7 million posts in April.

By the same token, we need to look back at how Ireland fared in this unprecedented economic implosion. It took four years for Ireland's unemployment toll to rise to its crisis-era peak in 2011.

Covid destroyed a similar number of jobs in mere weeks.

The Covid recession has been very different from any other downturn in modern times. It is also taking place amid a decade-long experiment in central banking that had driven interest to zero and below even before it hit.

Joachim Fels of PIMCO, one of the world’s largest investment managers with $2.2trn (€1.85trn) in assets, says that “coming out of a recession driven by lockdowns and voluntary social distancing rather than underlying economic and financial strains… there is a higher than usual amount of uncertainty in the outlook”.

He notes that while there is set to be a cyclical boom this year, there is “a lot of potential for medium-term” economic scarring – that’s economist speak for higher unemployment and lower wages and incomes, the kind of post-crash lost decade that many in the eurozone have experienced.

Those risks are spelled out in the details of the shiny March US jobs numbers.

For one thing, the headline unemployment rate of 6pc simply doesn’t capture the real level of joblessness as it doesn’t take account of those who have simply given up hope of finding a job. Federal Reserve chair Jerome Powell puts the true rate at 9.1pc.

As recovery starts, the official jobless measures are likely to double.

The US has lost eight million jobs since the pandemic hit, even after last month’s bumper hiring. That number rises to 10 million if you calculate it based on the pre-Covid rate of job creation.

More than four million Americans have been out of work for longer than six months, and prolonged unemployment means it is harder to get a job, plus, after all that time your former employer is more likely to have gone bust.

So where does that leave us?

We are going to see a very welcome vaccine-driven bounce back and when the shops and pubs do open, some of those billions sitting in bank accounts will be spent and jobs will roaring come back, at least initially.

Ironically, as the recovery kicks in here, unemployment will rise. Although a fifth of the workforce is without a job, based on Covid measures, the official unemployment rate is just 5.7pc.

That official rate is set to double to 11pc by year-end, and if workers cannot get back their old jobs, the hunt for work will take a lot longer.

The time to start really worrying is when the Government declares ‘job done’ and pulls back support measures, even as tens of thousands of workers have no realistic chance of finding a job in the near term.