Jobs at record levels but challenges remain

Brexit is just one issue making forward planning difficult for economists
Brexit is just one issue making forward planning difficult for economists

‘Significant challenges’ to the economic outlook exist and business, government and consumers should not become complacent about recent uplifts such as strong job creation a record unemployment levels.

The warning comes with the latest report from the Ulster University Economic Policy Centre (UUEPC) which says that despite generally positive sentiment within the business community, the outlook presents a mixed picture.

“The labour market continues to perform strongly and jobs are now above their pre-crash highs in 2008,” Jordan Buchanan, UUEPC economist and forecaster.

“It is also positive to see employment growth across a wide range of sectors across Northern Ireland, suggesting economic resilience in the recovery.

“However, despite a robust jobs market, ongoing challenges including low productivity growth, high levels of economic inactivity and heightened global risks are likely to hold back economic growth going forward.”

In the long term, he added, the challenges of protectionism and the huge uncertainties around brexit presented “difficult conditions” for forecasting future employmeny trends.

“In total, over the next decade our ‘baseline’ forecasts almost 21,000 net new jobs, but reflecting greater uncertainty that forecast ranges from an increase of 58,500 jobs in an optimistic scenario, to a potential decrease of 10,800 in our more pessimistic scenario.”

In the meantime, Mr Buchanan said current issues include real wage levels which remain lower than they were 10 years ago, at the peak of the boom, yet the economic recovery has been fuelled by consumer spending.

With an unemployment rate at record lows, it would be expected that wages would be growing at a faster rate than we are seeing in the local economy. This is a problem not unique to Northern Ireland. The UK as a whole and many other developed economies have also experienced low wage growth since the financial crisis.

“It is important not to underestimate how important the consumer is to sustain economic growth,” said Mr Buchanan.

“Over the last five years, economic growth has been supported by rising employment levels rather than significant increases in wages or productivity.

“Looking forward, as the rate of job creation slows, it will be critical that real incomes rise if consumer spending is to continue as the key driver of growth,” he said.

“As we move closer to leaving the EU and with the increased risk of a ‘no deal’ alongside continued poor performance in productivity growth, we have modestly revised downwards our economic outlook for Northern Ireland.

“Without clarity around global trading patterns, Brexit uncertainty, migration policy and ongoing border issues, forecasts may be more appropriately described as scenario plans based on different outcomes.”