Labour market recovery after the pandemic – Central Bank report

• Q4 2021 saw 2.5 million people in employment, the highest on record. Strong employment was supported by the domestic labour force, with migration playing a smaller role
• Two groups drove this labour force expansion; under 25s and women over 35. 
• Evidence that there are longer running trends that have encouraged women to remain part of the workforce for longer
  

The Central Bank of Ireland today (Friday 1 July) published a Signed Article (PDF 1.08MB) analysing  labour market recovery after the pandemic. The analysis shows that the Irish labour market has experienced a remarkable recovery from the effects of the pandemic. In Q4 2021 there were 2.5 million people in employment, the highest number on record. This strong employment growth has occurred without a notable surge in inward migration rather, the employment gains were supported by an expansion of the domestic labour force.

The Article highlighted that the growth in employment and labour force participation has been mainly driven by women over 35 and younger people.

The Article found that that the recent large increase in labour market participation reflects underlying trend improvements as well as the strength of the economic recovery, rather than structural changes due to the pandemic. Analysis suggests that the higher levels of participation for women could be sustained into the future, providing a boost to overall labour supply and supporting economic growth. The participation gains for under 25s could also be maintained as these cohorts are contributing labour alongside participation in education.

Whilst the participation rate in Ireland for 20-64 year olds, of all genders, is currently at its highest level at 74%, this is still below the best performing European countries such as the Netherlands at 83.7% and Estonia 79.1%.

The findings in this Article have implications for both labour supply and wage developments in the years ahead. The strong employment gains since early 2021, supported primarily by an expansion of the labour force, alongside continued high levels of job vacancies, indicate that the labour market is heading towards full employment. In addition, the increase in participation may have affected wage dynamics directly, muting wage growth in some sectors for example. However, to the extent that it has happened, this effect is likely to fall as the available pool of workers shrinks.

Research economist at the Central Bank of Ireland Tara McIndoe-Calder commented -

“Our research suggests that there is no strong evidence to date that changes during the pandemic, like a move to hybrid or fully remote working, were the dominant factors supporting the recovery in employment over recent quarters. Instead, the participation expansion related largely to under-25s and women over the age of 35, who tend to respond strongly to how rapidly the economy is growing. Women over 35 had seen increases in their labour force participation for underlying societal and structural reasons (this is synonymous with increased educational and occupational skill-level attainment for women) that pre-date the pandemic and is expected to continue for some time to come.

However, the further increases in participation needed to bring us closer to the best performing countries in Europe may not happen automatically and are likely require some further action”

Notes to editors:

Quarterly Bulletin Signed Articles are typically on monetary and general economic topics. The series was introduced in the autumn 1969 issue of the Bank’s Bulletin. Any views expressed in these Articles are not necessarily those held by the Bank and are the personal responsibility of the author.