Is it a recession if no one notices?

Can an economy slow-down without seeing a jump in unemployment?

It may seem a strange question — it would seem obvious that joblessness would have to increase as the economy winds down — but is the Irish economy in a peculiar place these days, skewed as it is by multinationals moving intellectual property and other assets through the State?

Through all the recent doomsaying about the path of the economy, the unemployment rate has shown little impact, if any. Even as a lagging indicator — job cuts announced in September might not feed through to the rate for several months — it has been remarkably stable.

Full employment

The rate has hovered at just over 4 per cent since May 2022. Even excluding the pandemic, when the rate surged to close to 8 per cent, unemployment has trended down steadily in recent years. Considering 4 per cent is the rate that economists generally use to describe a country at full unemployment, that is really quite something.

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And it seems like it will continue. State think tank the Economic and Social Research Institute may be forecasting a technical recession is on the horizon as gross domestic product shrinks, but it also expects unemployment to hold steady at 4.1 per cent this year and fall further to 4 per cent next year.

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So can a country really be in recession if nobody notices? By that measure it would seem so.

Still, there may be clouds forming on the horizon. Jobs website Indeed.com has seen a drop in the number of jobs advertised on its Irish website. That by itself doesn’t indicate job cuts. And would a worker really care that much if their employer is not hiring at the breakneck speed of the last few years?

Perhaps more importantly, Indeed’s own data suggest wage growth in Ireland has now peaked. Wage growth slowed to 3.7 per cent year-on-year in August compared to 5.5 per cent in March, according to the firm’s senior economist Jack Kennedy. As inflation holds firm, that may be a bigger worry for many than finding a new job.