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ISEQ steady-Ireland's labour market

Thursday, September 20 09:04:05

The ISEQ is steady this morning at 3,291, up 10 on yesterday's close as markets refocus on China's weak growth rates and the severe implications that a slowing China brings to the exporting prospects of Europe and the rest of the world. PMI surveys will be out during the day and may offer a clearer view of the world. Davy Stockbrokers looks at Ireland's labour market statistics this morning:

European and US stock markets rose yesterday (September 19th) - the Euro Stoxx 50 Pr closed up 0.6pc and the S and P 500 finished 0.1pc higher on the day. Investors reacted positively to news that US housing starts rose to 750,000 in August, providing further evidence that the recovery in the housing market is on a firmer footing. In early trading, European stocks followed Asian indices, with sentiment buoyed by the news that the Bank of Japan had decided to expand its quantitative easing programme.

Purchasing Manager Indices (PMIs) surveys for September will be released today. Thus far, the improvement in market sentiment in August and September has yet to translate into any marked improvement in measures of confidence, spending or output in the real economy, and the September surveys are probably too early to discern any positive impact from the Federal Reserve and ECB policy announcements. So market expectations are for the PMIs in September to remain well below the 50 no-change level, indicating that output in the European manufacturing and services sectors continues to contract in the final month of Q3.

Yesterday's Q2 labour market data for Ireland painted a dismal picture. Employment fell by 0.8pc in Q2 2012 quarter-onquarter and by 1.8pc year-on-year. The pace of contraction accelerated from Q1, when employment fell 0.6pc quarter-onquarter and by 1.0pc year-on-year. The unemployment rate was unchanged in Q2 2012 at 14.8pc, reflecting a sharp 14,200 decline in the labour force - consistent with emigration of roughly 40,000 per annum.

However, the annual 1.8pc decline in employment was split between a 6.3pc fall in the public sector and a marginal 0.3pc decline in the private sector. Private sector employment has expanded in four of the six quarters since Q1 2011, with the level of employment up 1.5pc. There has also been a divergence between the public sector and private sector in terms of nominal pay trends. Average public sector earnings rose 2.8pc in the year to Q2 2012Q2 with private sector earnings down 0.5pc. The overall picture is that private sector employment growth has not been sufficient to offset the sharp declines in the public sector. Clearly, this poor labour market performance questions the efficacy of the government's strategy to prioritise reductions in public sector jobs to avoid cuts in public sector pay according to Davy Stockbrokers.