Saturday, August 30, 2014

30/8/2014: Both Unemployment and Participation Rates Fell in Q2 2014

In the previous post, I covered duration of unemployment across age cohorts data for Q2 2014. This time around, let's take a look at labour force participation rates and unemployment rates.

As noted earlier, there are some good news in the latest QNHS data. And this theme continues with unemployment rate statistics.

Official unemployment rate has declined from 12% in Q1 2014 to 11.5% in Q2 2014 (seasonally-adjusted basis). Thus, Q/Q unemployment rate dropped by a substantial 0.5 percentage points, which is faster than the 0.2%points decline in Q1 2014 compared to Q4 2013. It is worth noting that in Q2 2013, Q/Q decline in seasonally-adjusted unemployment rate was shallower 0.1 percentage points. Overall, over H1 2014, unemployment rate declined by 0.7 percentage points compared to the end of 2013. Over the same period of 2013, decline was 0.6 percentage points.

Without seasonal adjustment, things are slightly different. Y/Y Q2 2014 unemployment rate is down 2.1 percentage points and in Q1 2014 the same decline was 1.7 percentage points. These rates are faster than the rates of y/y declines in unemployment for the same period of 2013.

All of which is good news as illustrated by the chart below:

Things are not as good on the participation rates front, however.

Non-seasonally-adjusted Participation Rate fell from 60.5 in Q2 2013 to 60.0 in Q2 2014. H1 2014 average participation rate was 59.85 against H1 2013 average of 60.0, H1 2012 average of 59.9 and H1 2011 average of 60.1, in H1 2010 the average was 60.8, in H1 2009 it was 62.2 and so on... Q2 2014 participation rate was lower than Q2 2011 reading of 60.5. By all metrics, participation rate has fallen and not just y/y, but also compared to other periods of the crisis.

On seasonally-adjusted basis, Participation Rate also fell, from 60.1 in Q1 2014 to 59.8 in Q2 2014. This marks the lowest Q2 participation rate since Q2 2000. Last time seasonally-adjusted participation rate expanded in Ireland was in Q2 2013.

Chart below to illustrate:

As chart above illustrates, the bad news is that participation rate is not growing and is basically flat since Q2 2011. Worse news is that it is now matching the crisis period low. Even worse things is that the participation rate is running below historical trend in every quarter since Q2 2010. Guess those higher taxes, as well as high cost of childcare for families, are keeping people out of the labour force (remember, labour force includes employed and unemployed workers who are searching for a job).

Or by definition: The labour force participation rate is computed as an expression of the number of persons in the labour force as a percentage of the working age population. The labour force is the sum of the number of persons employed and of persons unemployed.

So in basic terms, of every ten persons of working age, six are either employed or unemployed, and four are neither working nor seeking a job. At the peak of the Celtic Tiger, the ratio was 6.4 to 3.6.

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