Rise in labour force hits unemployment rate

An increase in the size of the labour force, rather than fewer jobs being created, is responsible
for the slowdown in the fall in unemployment. The unemployment rate fell slightly to 8.8 per
cent in February, from 8.9 per cent a month earlier.

Total unemployment fell by 2,000 on the

previous month, and 23,400 in the year, to
190,900. The joblessness rate has fallen by
42 per cent from its 2011 peak.

The youth unemployment rate, for those

aged between 15 and 24, fell to 20.1 per
cent, down from 20.3 per cent in January,
according to the latest figures from Central
Statistics Office. The European nation has
one of highest rates of university entrance
in the EU with around half of the nations
young people entering Higher education.

Conall Mac Coille, chief economist at Davy, said: “At face value, the pace of decline in
Ireland’s unemployment appears to have slowed over the past 12 months. Through the
calendar year 2014, the unemployment rate fell by 2 percentage points from 12.2 per cent to
10.2 per cent. However, Ireland’s employment growth has not slowed up and was 2.6 per
cent in 2015, accelerating from a 1.7 per cent gain in 2013.”

Mr Mac Coille said a “more measured” decline in Ireland’s unemployment rate reflected a
pick-up in labour force growth. “After years of stagnation, Ireland’s labour force grew by 0.8
per cent in the year to the fourth quarter of 2015. Participation among the key working age
groups is now rising again. Similarly, the latest estimates indicate that net migration was just
-11,600 in the year to April 2015, down
from -33,100 in 2013,” he said. “Of course,
increased labour force participation
principally reflects better prospects of
finding employment for those workers who
had abandoned searching for jobs. This is a
sign of strength in Ireland’s labour market,
albeit pushing up on the unemployment
rate”. Manufacturing growth was at its
slowest in two years in February as new
orders weakened, suggesting that a difficult global economic outlook may be starting to affect
the economy, which remains the fastest growing in the eurozone. The Investec
manufacturing purchasing managers’ index fell to 52.9 in February, from a six-month high of
54.3 in January, to its lowest level since February 2014.

© Mark Johnson,
InThinking www.thinkib.net/Economics 1
The weakness in yesterday’s manufacturing data was largely driven by the new orders
component of the index, which fell to 54.0 from 57.7 — the weakest pace of growth in
demand for new business since November 2013.

“We suspect that at least a part of this relates to recent euro strengthening, although we
should note that some respondents cited the US and UK as the main source of new export
orders,” Mr O’Sullivan said.

The original article was published in the Irish times on March 2, 2016. Accessed online at:
http://www.thetimes.co.uk/tto/irishnews/business/article4703285.ece

Questions:
The labour force is defined as the number of people who are
(a) Define the following terms:
employed (working) plus the number of people of working age
i. Labour force (line 1) [2 marks] who are unemployed (not working but seeking work).
Unemployment refers to people of working
ii. Unemployment (line 3) [2 marks] age who are actively looking for a job but
are not employed
(b) i. Explain why economists use an index to measure ‘manufacturing data’. (line 41) [2
marks]
to make comparisons between years and generate statistical results
ii. Calculate the change in net migration rate between 2013 and April 2015. (line 17) [3
marks]
-0.4%
(c) Outline two reasons why the rate of unemployment has risen in Ireland. [4 marks]

(d) Illustrate the effect on the Irish labour market of the rise in the size of the labour force in
‘after years of stagnation’. (line 14) [4 marks]

(e) Illustrate using an appropriate diagram why 'a difficult global economic outlook may be
starting to affect the (Irish) economy'? (paragraph 5) [4 marks]

(f) Explain why the high rates of youth unemployment might be particularly difficult for
Ireland to counter. (lines 29-39) [4 marks]

(g) Using extracts from the passage as well as your knowledge of economics state which
measures the Irish government could employ to reduce unemployment in the economy? [15
marks]

© Mark Johnson,
InThinking www.thinkib.net/Economics 2