It used to be that people would do anything for a job. Today, it’s more like – to paraphrase the title of the late Meatloaf’s iconic song – ‘I would do anything for a job, but I won’t do that’.
Companies, particularly in certain sectors, are struggling badly to access the skills they need. This is perhaps most acute in sectors such as healthcare and food processing because job hunters are taking advantage of the jobs market being a seller’s market. They can afford to be more choosey about the work they undertake in a way they couldn’t in the past. Many are therefore opting for other industries where the salaries are perhaps higher, and conditions perceived to be less challenging.
Annual inflation recorded its highest level for 30-years in December and is expected to rise further by the Spring, fuelling a cost-of-living crisis. This reading was the last before the next Monetary Policy Committee Meeting in February, suggesting that BoE will look to squeeze demand instead of supporting the economy through its temporary Omicron weakness. Yet the labour market remains healthy, despite Omicron and the end of furlough.
The annual pace of UK CPI inflation accelerated from 5.1% in November to 5.4% in December representing the highest rate since March 1992 (+7.1% y/y). UK inflation had peaked at 8.4% in April and June of 1991. Consumer goods inflation (+6.9% y/y) is running at twice the rate of consumer services inflation and is at its highest rate since July 1991 (+7.0% y/y). Goods inflation is expected to breach its record high of 7.4% y/y (Sep/Oct-90) in the coming weeks. Consumer services inflation (+3.4% y/y) remains more subdued by comparison and is at an eight-and-a-half-year high. By comparison, consumer services inflation was running into double-digits in late-1990 and 1991 and peaked at 12.1% in April 1991. Services inflation will be closely watched in the coming months as the strength of pay settlements will feed into this measure. Wage increases will also filter through into the cost of consumer goods.
Given what has happened to the economy over the last two years, Northern Ireland’s headline labour market statistics are a veritable winter wonderland. Unemployment is at 3.1% – one of its lowest readings on record. Meanwhile the number of employees on Northern Ireland’s payrolls hit another record high in December and almost 20,000 above March 2020’s pre-pandemic high. Indeed, no other UK region has witnessed a stronger rebound in payrolls growth. It is a similar story with median earnings growth over the last two years.
The UK economy turned in a solid performance on the eve of Omicron, with GDP surpassing its pre-pandemic level by 0.7% in November. Meanwhile the Omicron wave is receding, with signs that infections and hospital admissions have peaked. But challenges await. Inflation in the US is at its highest in four decades, with our own multi-decade high soon to come if forecasts are to be believed. A 6% rate would be the highest since the early 1990s.
Back in December 2021, NISRA’s Index of Services and Industrial Production surveys for Q3 2021 revealed that economic output was closing in fast on pre-pandemic levels or indeed even exceeding them.
For example, industrial production (which is mostly manufacturing) was just 0.1% below the pre-pandemic level of Q4 2019 while private sector services output was 2.2% above the same benchmark.
Omicron knocked back recovery hopes in December. But business adaptation and the fast roll-out of boosters means the setback might well be short-lived and a modest one. Meanwhile, outlasting Omicron and set to be among the big trends of 2022 is the shortage of workers, inflationary pressures and the climate transition. One-in-four cars sold last year were plug-ins of some variety. A reminder that things can change for the better, and fast.
Today sees the release of December data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – indicated that a reduction in consumer confidence amid the emergence of the Omicron variant led to a further decline in new orders, while growth of business activity was only fractional. Inflationary pressures remained elevated. On a more positive note, a further solid rise in employment was recorded and firms were optimistic regarding the outlook for output in 2022.
The Bank of England became the first major central bank to raise rates since the pandemic struck. It judged that rising inflation outweighed concerns over an Omicron-induced slowdown. In the meantime, COVID cases have leapt, prompting new restrictions and speculation of much more to come.
The podcast that keeps you up to date with what is happening economy-wise in Northern Ireland.
On the cusp of Christmas, it feels apt to reflect on the past, present and future of the local economy. And with issues like Covid, Brexit and rampant inflation very much on the agenda, there is no shortage of scary topics to discuss.
2021 was the year of the rebound and it was full steam ahead on the recovery with the roll out of vaccines facilitating that by allowing the economy to open up. This meant that vaccine queues were one of the images of the year, rather than the expected dole queues which were the ghosts of the past that didn’t come back to haunt us.
Output within Northern Ireland’s private services sector is back above pre-pandemic levels and has finally recovered the lost output from the previous recession – that’s the Global Financial Crisis / Property Crash one. It took the V-shaped recovery from a pandemic to get it back to levels last seen almost 15 years ago.
When it comes to the labour market, we are back above pre-pandemic levels in a range of areas including the number of employees on local payrolls. These have now reached record levels whilst the unemployment rate is below 4%. Predictions of a surge in unemployment following the end of the furlough scheme have proved wide of the mark. Some would say, with justification, that the job retention scheme has been probably the best pandemic policy in the world. Although some aspects of the labour market such as total hours worked and the number of self-employed are still well below pre-pandemic levels.
