Unemployment is likely to rise to 5.5 per cent this year, increasing to 7 per cent in 2009, the State training agency Fás has predicted.
In its quarterly labour market commentary published today, Fás said employment would rise by 24,000 this year, before falling by 31,000 in 2009, primarily due to the slowdown in the construction sector.
“While Ireland has continued to enjoy above average jobs growth, the worsening economic environment now means that a short-run correction in the labour market is imminent,” Fas said in a statement.
It said the most telling indicator of a weakening in the labour market has been the rapid rise in the numbers on the live register, which is up 27 per cent in the last six months.
But despite the slowdown, the long-term unemployment rate continues to be at an historic low of just 1.2 per cent, while employment rate of 69 per cent continues to be above the EU average of 66 per cent.
Fás senior economist Brian McCormick said: “There are already signs that some of the external problems facing the economy are having a direct impact on the labour market. Specifically, employment in the transport and communications sector has stagnated in the face of higher oil prices while manufacturing employment has been falling as exporters try to trim payroll costs in response to the appreciation of the euro.”
Mr McCormick said a “significant migratory response” should soften the blow of negative employment growth on unemployment.
Fás said it expected labour force flows to "adjust rapidly" to the changing economic reality. It predicted that inward migration would fall over the forecast period and that outward migration, primarily of central Europeans, will gather pace.
"In fact, we believe that 2009 will see the number of emigrants exceed the number of migrants by the order of 20,000."
“Nevertheless, the numbers on the live register will rise further and are likely to reach 250,000 by the end of the year.”
One area that has seen a “dramatic turnaround” in employment is the agricultural sector, which has had an increase of 7,000 in employment in 12 months, Fás said. It attributed the rise partly to the recent rise in food prices.