Thursday, August 4, 2011

04/08/2011: PMIs, Exports-led Recovery and Jobs - July 2011 data

Based on Manufacturing PMI (see detailed post here) and Services PMI (details here), let's chart Irish economy's progress on the road to the recovery.

First, consider the issues of employment and core PMIs:
So in terms of economic activity, we have moved:
  • In Manufacturing from the recovery with mild jobs creation in January 2011 to both employment and output contractions in July 2011.
  • In Services, a jobless recovery in January 2011 remains such in July with July reading showing accelerated joblessness and slower growth in output.
Summary of employment indices is extremely worrying at this stage:
Now, in terms of exports-led growth:
While exports performance continues to the upside in both Services and Manufacturing, in both sectors, exports growth is associated with declining employment, not rising. This is now an established trend with both June and July showing jobs declines amidst exports growth in both sectors, in contrast with May, when exports growth in both sectors supported fragile jobs creation.

So far, since January 2008, there were:
  • 17 months of jobs-destruction associated exports increases in Services, against just 6 months where jobs creation was associated with exports growth
  • 20 months of jobs destruction during coincident exports expansions in Manufacturing, against just one month when jobs creation underpinned exports growth.
Good luck to ya all who hope for an exports-led recovery to yield significant reductions in unemployment any time soon.


CiaranK said...

Dr. Constantin, do you feel that if this export growth continues that unemployment will also continue to rise or can you see a point that export growth might hit where it will have a positive effect on employment as I can only see the export market growing for the near to medium future?

Thank you

TrueEconomics said...

Of course exports activity contributes to employment. I don;t doubt that. And as exports expand, so will, eventually, employment in the sectors and associated firms grow.

My point is that it is too naive to rely on exports-led recovery while destroying consumer demand and household investment through tax and other policies we are adopting.

CiaranK said...

Thanks. I look forward to your next post and view on the turmoil that has hit this morning and with the overnight decline in Asia. Keep up the great work!