Growth, jobs, wages: there are plenty of positives on the sunny side of Ireland's economy

The Journal

2 days ago

WE LIKE TALKING about Ireland's economic problems.
Focusing on the problems has plenty of merit – it's how things tend to improve over time.
But there's a balance to be struck. And focusing too much on the negative can end up leading to a fatalistic view of the state the country's in.
So, in the interest of injecting some cheer during a bank holiday weekend, we're taking a look at some of the things going right in Ireland's economy (with a few caveats).
Without further ado…
1: Growth
Straight off the bat – Ireland's economy is growing.
By how much is difficult to say. As is the case with many Irish indicators, there's room for interpretation around particular statistics.
Normally, countries measure growth using GDP (growth domestic product), which is meant to measure all the things a state buys and sells.
A rise of about 2-3% in a year is considered pretty good for a developed country. Below this level isn't great, and above it is very good.
But in Ireland's case, GDP is extremely distorted by multinational companies -
as we've explored before.
Previously, GDP way overstated how much the economy was growing by. There was obviously the famous
'leprechaun economics' incident in 2016
, when Ireland's GDP soared by 26% in a single year.
So instead, Irish analysts prefer to use 'modified domestic demand' (MDD). This is a measure created by the Central Statistics Office to evaluate economic growth while stripping out multinationals moving money around.
By this metric, Ireland's economy
grew by 2.7% last year
, which would put the country in a pretty decent place.
2: Unemployment
It's been talked about plenty over the years, but it's still worth mentioning: Ireland's unemployment rate is extraordinarily low.
It's been hovering at about 4.5% for the past year or so, and recently
dropped to 4.1%
.
In most economies, an unemployment rate of 5% is considered 'full employment', meaning almost everyone who wants a job, has one.
It's not 0%, because some unemployment is considered normal. Think people who decide to leave a job, retirements, etc.
So Ireland's 4.1% rate means that companies don't tend to have the pick of an enormous labour pool when hiring. This puts jobseekers in a better position.
When you consider the unemployment rate
was close to 16% in 2012
, there has been an incredible turnaround in just over a decade.
Research published just last week found that this drop has been
even more pronounced in disadvantaged areas
, slightly narrowing the gap between the richest and poorest.
3: Wages
What's growth and low unemployment without more cash in your pocket?
Luckily, Ireland is experiencing wage growth. Average earnings rose by 5.4%
over the last 12 months to €1,026
, crossing the symbolic €1,000 mark.
The CSO said this was driven by a few factors. As well as low unemployment, Ireland also has high employment growth (i.e. new jobs being created).
Employment is up by 3.3% annually. Meanwhile, the job vacancy rate – measuring how many positions are vacant across the economy – is stable, at the low figure of just over 1%.
This has combined to drive earnings higher, with workers more in demand.
Now, averages can be misleading. If you have two people – one earning €90,000 and the other €10,000 – the 'average salary' is €50,000.
That's why it's also good to look at the median. This is the number in the middle of a dataset. In this case, it gives a better idea of what a 'typical' worker earns.
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The figures here lag the 'average' stats a bit. The most recent numbers show median annual earnings
rose by 3.3% in 2023
compared to 2022.
While a fair bit lower than the 5.4% average wage rise, it's worth keeping in mind that these are two different years we're looking at. It's possible median wages are rising more strongly now. And 3.3% is still decent.
4: Inflation and spending
In late 2022 and early 2023, governments across the western world were in near-panic at the rate of inflation.
Prices surged internationally for a variety of reasons, including Russia's invasion of Ukraine and the impacts of Covid.
This of course included Ireland, where inflation
soared to a peak of 8.5% in early 2023
.
Readers will no doubt know why this is bad: high inflation can quickly erode living standards and consumer confidence. This can cause a spiral which could eventually lead to a recession.
Luckily, with a notable exception we'll come to, the worst of this seems to have passed.
It's estimated that Irish inflation
dropped to 1.4% in May
, which is considered a rate where prices are under control.
With inflation low and wages rising, people seem to have some cautious confidence when it comes to spending money. Retail sales rose over the last year, although not by too much -
1.1% when spending on cars was excluded.
5: Corporate tax
This is one to just quickly touch on, as we've already covered it in-depth
plenty of times
.
But the billions and billions which have poured into state coffers in recent years are unprecedented.
It has provided Ireland with the closest thing to a real life 'magic money tree', something most countries would do anything to have.
6: Stock market
Finally, it's worth briefly mentioning that Ireland's stock exchange is trading around all-time highs.
The market is currently at 11,400 – for an explanation on what that means,
read here
.
But the important thing to know is, the higher the number, the more Ireland's biggest publicly traded companies are worth.
The index dropped to about 9,400 in late March on the back of tariff fears. But the exchange has surged again since.
While this may not mean much to the man on the street, it is a sign that major Irish businesses are doing well.
Ok, now the caveats
Some points to quickly mention, for the sake of context.
While inflation has broadly stabilised, food prices are still surging.
The latest estimate from retail analysts Kantar Worldpanel suggests that inflation in Irish supermarkets is just over 4.5%.
This tracks with CSO stats, which show food prices are
up 4.1% over the last year.
Housing and rent prices are also, of course, still rising. These jumped by 8.7% and 5.5% respectively in the 12 months to December 2024.
For many workers, a wage increase of between 3% and 5% may be of little use if much of their spending is going on housing and food.
The modified domestic demand figure for general growth is likely a good estimate of Ireland's growth, but we're still vulnerable to the impact of multinational distortion.
Speaking of which, there's the looming dread around whether Ireland's corporate tax windfall will suddenly dry up, as the US
is eager to get more cash from its multinationals
.
And while the companies currently on Ireland's stock market may be doing well, there are almost no new businesses going public. This is a long term concern, as it indicates medium and large Irish firms
are moving their business abroad.
But hey, we said we'd try to keep things positive for once.
So while these caveats are pretty major, it's worth noting the good in the economy too.
With growth low across the EU and many countries struggling, Ireland, at least for now, has quite a bit going for it.
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