The weirdest recession to date…

The so-called Global Uncertainty Index hit a record high in 2019 before the word Coronavirus had even entered our consciousness. But the last 20 or so months have completely recalibrated the parameters of what uncertainty is. In the time since, businesses have had their worlds turned upside down and back again – things that they thought would never happen, did, and things they would have absolutely expected to happen didn’t – and have also therefore had to reset as well.

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“Furlough – Probably the best pandemic policy in the world?”

The onset of the pandemic last year led economists to conservatively pencil in double-digit unemployment rates for the UK and Northern Ireland. What economists hadn’t initially factored in was the Chancellor’s Mario Draghi-style ‘Whatever it takes’ approach to protect jobs and prevent such an outcome from occurring. Rishi Sunak quickly unveiled the Job Retention Scheme (JRS) or furlough scheme. A policy designed to prevent mass unemployment by paying employers to keep jobs until the worst impacts of COVID-19 had passed. In time, economists progressively lowThe onset of the pandemic last year led economists to conservatively pencil in double-digit unemployment rates for the UK and Northern Ireland. What economists hadn’t initially factored in was the Chancellor’s Mario Draghi-style ‘Whatever it takes’ approach to protect jobs and prevent such an outcome from occurring. Rishi Sunak quickly unveiled the Job Retention Scheme (JRS) or furlough scheme. A policy designed to prevent mass unemployment by paying employers to keep jobs until the worst impacts of COVID-19 had passed. In time, economists progressively lowered their unemployment forecasts and revised down the anticipated surge in joblessness when the furlough scheme eventually ended. After several extensions, the Job Retention Scheme finally ended on the 30 September 2021. 

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Chief Economist’s Weekly Briefing – Slowing

The Monetary Policy Committee kept official interest rates unchanged last week, as expected. The big determinant of when they do move will be the the labour market reaction to the end of the furlough scheme. In the meantime, soaring energy prices, rising inflation and worker shortages are continuing. The challenges to the recovery are mounting. But adults in Northern Ireland will have £100 from the High Street Voucher Scheme to soften the blow.

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Chief Economist’s Weekly Briefing – Wind Down

Covid-19 cases are on the rise again, especially in Scotland, where schools re-started three weeks ago. More data confirming a degree of caution set in amongst consumers mid-summer – UK net consumer credit growth dropped to zero in July and the savings rate is still unusually high. Meanwhile labour shortages appear to be intensifying.

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Chief Economist’s Weekly Briefing – Hey, it’s complicated!

Data releases are sending out mixed signals to the Bank of England’s MPC. On the one hand, there is rising evidence of growth slowing in Q3 as consumers turned cautious and firms struggled with supply-side shortages. Yet the labour market continues to recover rapidly with any slack declining fast. The latter could push up wages for longer, risking a firming up inflation expectations.

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Labour market recovery moves up a few gears in Q2 2021

The latest data download from NISRA represents the most positive set of labour market statistics since the pandemic arrived. All the key indicators moved in the right direction. Unemployment and economic inactivity rates fell in the three months to April relative to the previous quarter. Meanwhile the number of Northern Ireland employees on payrolls, hours worked and the employment rate all increased. Perhaps the only fly in the ointment was self-employment fell to a 19-year low and there was a pick-up in proposed redundancies in the first half of June albeit from very low levels. Today’s labour market statistics coupled with the recent Ulster Bank Northern Ireland PMI surveys for April and May signal that the local jobs recovery has moved up a number of gears in the second quarter. Indeed, May’s PMI posted the joint-fastest rise in private sector staffing levels in the survey’s nineteen year history. 

An easing of lockdown restrictions has facilitated a significant rebound in economic activity and employment. The successful and rapid rollout of vaccines also effectively ensures that the severe lockdowns of the past will not be required in the near future. However, it is important not to get carried away. This stage of the economic recovery was always going to lead to the strongest rates of growth and pick-up in hiring. Indeed the HMRC payrolls data may reveal a return to pre-pandemic employee levels as soon as next month.

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What a difference a year makes

Twelve months have passed since the labour market reacted to the pandemic induced slump in economic activity. The initial impact was most noticeable on the claimant count (the numbers claiming unemployment related benefit) and the HMRC’s payrolls data. The former posted a record monthly rise in April and peaked at 63,800 in May. That was more than double March’s figure of 30,500. Meanwhile the number of employees on the HMRC’s payrolls data tumbled by almost 12,000 over the same period. Unprecedented employment support measures, such as the Job Retention Scheme (JRS), steadied the ship, but 2020 was still a record year for redundancies.

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Labour market recovery or false dawn?

Northern Ireland’s latest labour market statistics smack of ‘nothing to see here…just move along’. Other than the record number of redundancies proposed in 2020 (11,000), there are few signs that the economy is in the midst of an economic crisis. Indeed, many of the indicators point to an improvement. For example, the unemployment rate and the number of individuals claiming unemployment related benefits is falling. Meanwhile the total hours worked and the number of employees on payrolls continued their upward trends. Talk of a labour market recovery, however, is premature. The Chancellor recently stated that the economy is going to get worse before it gets better. Similarly, the labour market will deteriorate before a sustainable recovery takes hold. Unprecedented employment support measures, such as the Job Retention Scheme (JRS) and the Self-Employment Income Support Scheme (SEISS), largely inoculated the UK and NI economies against a severe labour market shock. But once these measures are withdrawn a surge in unemployment in the second half of the year is inevitable.

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Tipping point for the NI labour market?

Resilience in the face of recession – Throughout the pandemic many key labour market indicators have not been sending out distress signals.  For example, the number of employee jobs in Q1 was a record high and unemployment remained close to its all-time low. That doesn’t sound like an economy in the midst of its deepest recession on record. Unprecedented levels of support, not least from the Job Retention Scheme, have prevented employment falling off a cliff. A range of interventions have meant that while the UK economy experienced one of the sharpest declines in output (GDP) of any economy in Europe, employment within the UK has (for now) held up better than almost all of its former EU counterparts. Incidentally, the Republic of Ireland is at the other end of the league table for both measures – i.e. the RoI has experienced one of the shallowest recessions in terms of GDP but one of the deepest declines in employment within the EU.

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