Investor/An insider's guide to the market: In recent weeks global equity markets have relinquished a significant portion of the gains built up during January and February. The terrorist attack in Madrid played a part in unsettling equity markets.

However, the catalyst for the current setback was rooted in the US employment report released on March 5th last.

This showed that the monthly rise in the US non-farm payroll was only 21,000, compared to expectations for a rise of 125,000. The unemployment rate held steady at 5.6 per cent but the overall tone of the report was supportive of those who hold the view that the US economic recovery is a "jobless" recovery.

Over the past six months there has been an intense debate regarding the sustainability of the current rapid pace of US economic growth. The statistics clearly show that far fewer jobs have been created compared with previous cyclical recoveries.

Without the creation of a large number of new jobs it is difficult to see how the consumer can continue to boost the US economy.

There is no single convincing reason as to why US job creation has been so sluggish over the past year. The transfer of some service jobs by high-profile multinationals to emerging markets such as India is certainly a factor. Or it may be that the normal time lag between accelerating economic growth and employment growth has simply lengthened. If this is the case,  job creation should eventually become a feature of the current recovery.

However, the equity market may well tread water until there is clear evidence that the US economy has moved from a "jobless" recovery to an "employment creation" recovery.

Not surprisingly the Irish equity market has also fallen back in recent weeks in line with global trends. However, in contrast to the US experience recent Irish labour force statistics show that the economy is continuing to create jobs at a very healthy rate. The figures were released on March 11th and show that employment conditions improved markedly in the fourth quarter of last year with employment growth accelerating and unemployment subsiding during Q4. The key features of the report are:

• Total employment in Q4 was 2.5 per cent higher than a year earlier and, on a seasonally adjusted basis, the employment level was a record 1.817 million.

• Growth in employment was quite widespread across sectors with the agricultural and manufacturing sectors recording only modest declines in Q4.

• Private sector employment grew more strongly than public sector employment over the quarter.

These are very encouraging employment trends and will serve to underpin the more optimistic forecasts of Irish economic growth this year and into 2005.

A particularly positive feature is that it is the private sector that is taking up the slack.

In the short term, data such as this will probably have only a limited impact on the Irish equity market, as the market will continue to be influenced by the vagaries of day-to-day sentiment in overseas markets.

However, on a medium-term view these employment figures strongly support the argument that the Irish economy can grow faster than the European average on a sustained basis.

Therefore, companies that generate a large proportion of their profits from their Irish divisions should be capable of above-average profits growth. The sector that has the greatest exposure to the Irish economy is the financial sector and it is therefore highly sensitive to developments in the domestic economy.

However, the share prices of the Irish financial stocks have so far failed to respond positively to these more positive economic statistics. On the contrary the larger stocks in particular have been under selling pressure, apparently due to worries about declining profit margins in the Irish banking sector.

Competitive forces are undoubtedly squeezing profit margins, which will limit profit growth.

However, as long as the economy performs well new business growth should be sufficiently strong to overcome much of this erosion in profit margins. A further consideration is that an ongoing healthy economy combined with lower interest rates will limit the risk of any prospective deterioration in the incidence of bad debts.

Finally, for those investors that are keen to gain exposure to the Irish economy this week sees the return of Eircom to the Irish Stock Exchange.

Whatever about the pros and cons of the telecoms business, Eircom does offer a pure exposure to the Irish telecoms sector and, in this respect, it will be welcomed by investors as it widens the investment choice available. Of course the prospective share price performance of Eircom, and the overall market, will be the product of a myriad factors.

However, the current positive trends evident from the recent labour force statistics suggest that at least domestic economic conditions will be a favourable influence over the medium term.