Where in Ireland has seen the biggest increase in unemployment?

My recent attempt to put some figures on the scale of negative equity in Ireland – which concluded that about 40% of Irish homes are worth less than when they were bought and that as many as 20% of homes may be in negative equity – sparked some discussion here, on thepropertypin and most thoroughly on irisheconomy.ie.

The original post was designed just to put some numbers on the potential problem of negative equity, leaving aside for the time being the implications. Two important strands of discussion have arisen about the implications. The first relates to financial consequences, as mentioned by Karl Whelan, particularly in relation to the proposed NAMA and the fate of the banks. The second broad strand of discussion, being led by Liam Delaney, relates to how negative equity has labour market implications, particular when unemployment is on the rise. (Unemployment and negative equity are mirror images of the home ownership/labour mobility discussion being led in the US by Richard Florida.)

I’m currently working on estimates of how many households are affected by the dual problem of unemployment and negative equity. Combined with the likelihood of falling rents over the coming two/three years, rents being the alternative income a homeowner could get from their house, this is a cocktail for widespread misery currently partially staved off by all-time low interest rates and therefore mortgage repayments.

A next step in working out where both negative equity and unemployment will strike is looking in more detail at the problem of unemployment. The CSO provides very detailed statistics on unemployment by county/town and more occasional detail on the age profile and duration of unemployment. The map below gives an idea of ‘unexpected’ unemployment (original visualization here). It show the increase in those signing on by county in April 2009, compared to the average of 2005 and 2006, meant to indicate a natural level of unemployment (whether long-term or just switching jobs).

Unemployment in Ireland by county, April 2009 compared to 2005/2006

Unemployment in Ireland by county, April 2009 compared to 2005/2006

Those looking with relief at counties in a light brown – such as Waterford, Louth, Donegal and Mayo – should be aware that in all counties, the April 2009 was at least twice the 2005/2006 average. What’s more worrying, though, is that there are a number of counties where unemployment is three times what it was three years ago. In Meath and Kildare -stalwarts of Dublin’s commuter belt – unemployment has more than trebled. Likewise in Cavan and Laois.

The next part of the puzzle is to revisit county-level estimates of negative equity based on comments on the last set of figures and then try to put some numbers on how many households finds themselves faced with both unemployment and with a house worth less than their debt to the bank.

The Pelosi scare-graph revisited: Private sector job losses and camel recessions

As some of you may know, Nancy Pelosi has been scaring people with graphs, recently. By her metric, namely the absolute numbers of jobs lost, the current recession is more severe – and faster – than the last couple of regressions.

Naturally, something that high profile gained a lot of attention and ultimately modification. The one people seemed to settle on was one by William Polley, who made some slight modifications and improvements. In particular, he made a greater number of comparisons all the way back to World War II, and also changing it from absolute number of jobs lost to percentage jobs lost, to give some idea of the scale of the recession.

Of course, I could hardly let a good graph pass me by. Below is a slightly different version, with three more tweaks, to tackle some remaining issues:

  • Firstly, I’ve averaged the four recessions between 1948 and 1961, calling them the “1950s recessions” in the absence of a more appropriate nickname. The reason for this is that the four recessions in that period were all remarkable similar. In particular, they all started in Autumn and ended almost two years later in Summer. They had similar length and similar severity, and there was a similar government response each time – increase the number of jobs in the public sector by about 6%.
  • Secondly, I’ve tried to further reduce the ‘clutter effect’ – or at least make the graph more intuitive – by using the colour scheme to indicate passage of time. The darker the colour, the more recent the recession.
  • Lastly, and most substantively, I’ve focussed just on private sector employment. Government employment tends to be acyclical and rising steadily (apart from the early 1980s – perhaps Reagan swinging the axe?), so the focus should be on total private sector (non-farm) employment.
% fall in US private sector employment during recessions, 1945-2009

% fall in US private sector employment during recessions, 1945-2009

It’s hopefully pretty self-explanatory – our recession looks like it’s going to be dead hard! Might as well get the discussion started with a few initial observations on the graph:

  • By this metric – arguably more down-to-earth than fuzzy GDP metrics – recessions have been getting longer, not shorter, since the war. 1950s recessions lasted two years, the last one (2000-2003) stretched to more than four years!
  • The worst point of the recession has been been getting milder and milder – at least until this recession. A good old-fashioned 1950s recession would wipe 6% or more off private sector jobs. The early 2000s recession never even reached 5%. Although it did come close twice, speaking of which…
  • Recessions are like camels. Just as camels can have one hump or more than one, it seems recessions can be Dromedary or Bactrian also and in fact are drifting towards the multi-humped latter species.

Unfortunately, we don’t have the monthly data to do the same for the 1930s recession – or indeed to collate data across a wide spectrum of countries. But, if the USA is a good bellwether for the downturn, whatever about it perhaps being more flexible in the upswing, then it seems that modern (i.e. post-1980) recessions hit a smaller number of workers for longer than their pre-1980 counterparts.

It looks like our current recession is going to mix the worst of old-time recessions, i.e. the 6%+ fall in private sector employment, with the worst of modern recessions, i.e. it’s going to last three years or more and probably come back with a vengeance a couple of times just when we think it’s getting better.

Public Sector pay in Ireland & the €50,000 question: It’s not that difficult!

Watching Monday’s Questions & Answers, I became increasingly baffled as to how poorly understood the gap between public sector and private sector pay in Ireland actually is. I conducted a mini-straw poll, through the various media of living room chat, email and Twitter. That poll made me realise that while I had been labouring under the presumption that despite all the stats we have on wages across sectors, those stats were having no impact, others were labouring under the presumption that the debate had to be kept at a general level because we had no statistics on the topic.

The guts of a decade ago, I undertook some research for Prof. Frances Ruane on the original benchmarking deal. What we found at the time was that there was no gap emerging between public and private sector wages, or if the gap was there at all, it was in favour of public servants. For those interested in more on that 2001 perspective, I’ve embedded a version from Scribd at the very bottom of the post.

Given the way this week is going, with public sector unions somewhere between agog and apoplectic at the idea of having their wages reduced, and given that no-one in public discourse (if Q&A is representative) is quoting these figures, I thought it might be no harm to see if I could do up what we in the business call “a one-slider” that might make them understand the decision a little better.

First, a general comment about public sector pay cuts. This can’t possibly be that much of a surprise to anyone in the public sector. After all, this is what they signed up to in 2001, with benchmarking. Benchmarking may have been an incredibly expensive way to do it – costing the economy €1bn+ every year and counting – but it did establish a principle in public sector wages in Ireland. That principle is that trends in public sector wages must mirror those in the private sector. It’s incredibly cheeky of those happy to have the principle applied in the good times to argue that they shouldn’t have to ‘bear the brunt’ of having the same principle applied in the bad times.

Now for the one-slider!

Graph of public and private sector wages, Ireland, 1998-2008

Graph of public and private sector wages, Ireland, 1998-2008

And in true consultant style, three key points from the above graph:

  • Lest we forget the most obvious, in every year of the series, public sector workers were paid more per year than their private sector counterparts*. 30% more on average! (There may be perfectly legitimate reasons for this, for example average experience/years worked may be higher, responsibilities may be greater… but a priori, who knows?)
  • As you can see, the gap has widened, not narrowed over the decade. In fact, in euro terms, it widened 8 years out of 10! And after the two years of greater private sector increases (prizes for eyesight if you can spot them on the graph), there were huge increases in public sector pay the following year.
  • Public sector pay is at least five years ahead of private sector pay. What public servants earned in 2003 took their private sector counterparts until 2008 to earn (in fact, they’re not even there yet, another €500 or so to go!).

With the Live Register now rocketing towards 400,000 and private sector wages now stagnant, bonuses disappearing, total earnings in the private sector are falling. Therefore, according to the principle of benchmarking, so must public sector wages. As they are paid €50,000 on average, compared to average wages of less than €38,000 in the private sector, this won’t be the biggest economic calamity to befall Ireland this year. Now, can we please incorporate this knowledge into our social dialogue?

* Public sector includes public administration and education, but excludes health. No data there for some reason. Private sector includes all sector apart from agriculture (again no data). Some other methodological notes: I have had to assume Q4 figures for 2008 equal to Q3 in some instances or just take the average for the first three quarters, as Q4 data are not yet out. Construction figures only start in 2004, while manufacturing/industrial wages end in 2007, so I have had to use rates of change for the remaining sectors in those time periods, but the level of wages is determined by the full sample of private non-agricultural wages.

Wisdom of the crowds? Web2.0, hubdub & guessing Ireland’s unemployment

I had the rather pleasant task today of going through a range of Web 2.0 / social networking tools and establishing the potential in their application to primary research. Some key things that the new generation of web tools can give include:

  • Using something like digg or scribd to find key themes and recent developments in a topic, and – because you know who’s posted and who’s posted most – experts on a particular topic
  • Using something like basecamp or dimdim to project manage flexibly, particularly when teams are non-traditional, i.e. they are globally dispersed, working from home, volunteer-based, etc.
  • Using something like LinkedIn or indeed WordPress to access groups of experts on a particular topic and start a discussion
  • Using something like Manyeyes (which I’ve done in a few posts) or wordle (which I may have done in one too many posts last year!) to come up with new visualizations and ways of thinking about data

Many or most of these I was already somewhat familiar with. Indeed, twitter is increasingly one of my main sources for accessing news, thanks to RTE’s twitter services, and accessing expertise, as a surprising number of economists are on it. (I may also use it to keep tabs on Stephen Fry and Jonathan Ross, but that’s probably for another post!)

Anyway, what I was not aware of, or rather perhaps only vaguely aware of, was the plethora of wisdom-of-the-crowd prediction markets tools out there. By way of example, I’ve set up one at hubdub, that hopefully proves my point:

When will Ireland’s Live Register top 350,000? I hope the crowds will tell me…