Such has been the flow of positive news on the jobs front in recent years that it came as something of a shock when the major US company, Motorola, announced it would be laying off 750 people at its plant in Swords in North Co Dublin. It is the biggest single redundancy since Seagate pulled out of Clonmel in 1997 and results from a deal under which Motorola will contract out much of its manufacturing to another US firm, Celestica. Another 650 people employed by Motorola in Swords will transfer to Celestica, which has a plant adjacent to the Motorola facility.
Fortunately, the strong state of the jobs market means that most of those losing their jobs should be able to find alternative employment. But the inevitable question is whether the losses at Motorola are a sign of things to come? They certainly do demonstrate the continued vulnerability of the economy to decisions taken by overseas multinationals. These firms have created tens of thousands of jobs here. However, inevitably they take their investment decisions based on maximising their profits and can move jobs out of Ireland as quickly as they move them in. The net jobs balance from overseas investment has been strongly positive in recent years, particularly when the contribution to the wider economy is counted in. However, there are reasons to expect slower overall jobs growth over the next couple of years. This is partly because the economy is running at full capacity and the expansion of many businesses is now constrained by a severe shortage of labour.
There are also other influences at work. One is the increasing trend for large companies to outsource manufacturing - in other words to get other producers, often located in countries with lower labour costs, to make many of their products for them. Ireland is now a relatively high labour cost location, so we can expect a continued rationalisation of lower to middle-skilled manufacturing plants based here. This puts demands on the companies concerned and on industrial policy in general; Irish management must continue to upgrade operations here to higher levels of skill and expertise, while the Government must provide the environment to allow this to happen. This is why initiatives in areas such as e-commerce and biotechnology development are so important to our long-term growth outlook. A more worrying threat would be a more generalised shake-out in the technology sector. Many of the shares of the big US technology companies who are major employers in Ireland have fallen sharply in recent months on the US NASDAQ index. This market nervousness has now knocked on to fears in some quarters that the US economy may be heading for a "hard landing". Fortunately, such fears appear a little overdone at the moment, but we may still he heading for a situation where major US companies are forced to slow their expansion plans somewhat and to take a hard look at their existing investments abroad.
This uncertain outlook underlines the importance of maintaining competitiveness in all aspects of the economy. The high level of borrowing and soaring property prices already leave the economy vulnerable to any international bad news. We must not make this worse by building in ever-rising wage and other costs which would seriously dent our ability to attract investment and compete on international markets in the years ahead.