The surge in employment seen this year is expected to continue into 2005, according to two new reports. The Economic and Social Research Institute (ESRI) Winter Bulletin, published this morning, confirms the positive picture painted by the annual market review of FÁS, released yesterday.
The two organisations predict that employment will have grown this year by between 2.4 and 2.6 per cent, the equivalent of 44,000 jobs, before growth moderates next year to around 2 per cent as the economy moves towards full employment. The demand for labour will be underpinned by economic growth of around 5 per cent next year, according to the ESRI.
Although this rate is less than that predicted by the institute in the autumn, it is still close to the level which is considered sustainable in the medium term.
The ESRI has trimmed back its growth forecast to reflect the weakness of the dollar, which will hit demand for Irish exports in the US and dampen growth prospects elsewhere in the euro zone.
The weak dollar will, however, contribute to lower inflation here and also delay the expected rise in European interest rates, according to the ESRI. Inflation next year is expected to average 2.1 per cent, down marginally from this year's expected outturn of 2.2 per cent.
The main threats to this upbeat scenario are a further weakening of the dollar, and an abrupt end to the current boom in house building. The construction of almost 80,000 new homes contributed one percentage point to the growth of 5.5 per cent experienced by the economy this year, according to the ESRI.
The institute looked at the consequences of a 50 per cent reduction in house building and concluded it could shave up to three percentage points off economic growth. But they say such a scenario is unlikely.
In its annual labour market review, the State training and employment authority, FÁS, predicted that 32,000 additional jobs would be created in 2005. FÁS warned, however, that a range of policy initiatives was required to maintain the momentum in both employment and economic growth.
It said the State needed to develop a "coherent immigration policy", including a new "green card" system for workers from outside the EU.
Mr Brian McCormick, the principal author of the review, said 50,000 workers from the new EU states had come to the Republic to work since May 1st, yet no analysis had been done of the skills set they brought.
The review said the Republic would need a large number of immigrants in the coming years to meet its high-skills needs and, if rapid employment growth continued, to fill unskilled jobs as well.
"A skills-based immigration strategy should be developed that will attract a sufficient number of professionals and appropriately skilled workers to eliminate knowledge and infrastructural bottlenecks," it said.
FÁS also called for measures to ensure social welfare claimants did not lose out financially by taking up jobs. The fear of losing secondary benefits, such as medical cards, was discouraging claimants from entering the labour market, it said.
The positive outlook adopted by FÁS was echoed in a separate employment study published yesterday by recruitment specialists Manpower.
Of 562 Irish employers interviewed as part of an international survey, 19 per cent said they expected to hire more people in the first quarter of next year, compared with 4 per cent who said they expected to reduce their workforce.
Employers across all but one sector of the Irish labour market have positive hiring intentions, the exception being restaurants and hotels, Manpower said.
FÁS said that with employment growth next year expected to match labour force growth, the numbers unemployed should remain stable. It predicted a slight drop in the unemployment rate, from 4.5 per cent this year to 4.4 per cent in 2005.