Life after the Tiger. During the boom years we got used to huge increases in total employment each year. Now the jobs market has lost a lot of its bounce. The prospect of broader economic recovery should lift recruitment moving into next year, although more fundamental structural factors pose some questions for the future.
As Charlie McCreevy put it earlier this year, economists have been saying that the recovery is "six months away" for quite some time. Now the international signals are that it may finally be arriving, although the likely pace of recovery remains open to question.
There is no doubt that the Irish jobs market held up remarkably well during the difficult times of the last two years. The unemployment rate, as measured in the Quarterly National Household Survey, was 5.2 per cent in mid-year, up from the 3.7 per cent low of early 2001 but still low by international standards, or compared to our own recent economic history. It is easy to forget that just 10 years ago the jobless rate exceeded 15 per cent - while the EU average is around 10 per cent.
Live register trends suggest that the unemployment rate has started to fall again over the past few months as recovery gathers pace. The resilience of the jobs market is also reflected in total employment levels. The number of people at work stood at over 1.8 million in mid-year, 26,000 higher than the same time last year.
While after seasonal adjustment there was some signs of a fall-off in the last quarter, the historical perspective is again useful. Over the past decade the numbers at work has risen by more than 600,000, or a 50 per cent increase from its 1993 level. Despite a few difficult years, the boom year gains have been broadly retained.
It would be easy enough to conclude that, with recovery on the way, the only way now is up for employment in Ireland. And there is no doubt that a broadly-based and sustained international recovery would greatly boost the jobs market. So far the signs are reasonably optimistic, with the US economy leading the way to recovery.
There are doubts surrounding this upturn. The huge US current account deficit could trigger a destabilising descent for the dollar. And the big euro-zone economies continue to lag behind, even if they too are beginning to show signs that the worst may be over.
However, there is a good chance that 2004 will be a better year for the world economy than 2003, benefiting the jobs market through higher demand for our exports and possibly some lift to inward investment from multinationals.
In its budget forecasts, the Department of Finance predicted that total employment would increase by 1 per cent, or around 17,000 next year, up from a 0.6 per cent rise expected this year.
Behind these cyclical factors lie more fundamental structural considerations. There is no doubt that the move eastwards - to eastern Europe and the Far East - of lower value manufacturing and some service jobs - will continue. Employment in mobile multinational industry, supported by IDA Ireland, has fallen for three years in a row. Job numbers are also dropping in indigenous industry and lower-value areas of engineering are under constant pressure.
The appropriate policy answer to this fallout of low-value jobs is twofold. One is to maintain price competitiveness as best as possible, to slow the inevitable eastward jobs drift. Inflation here is now moving closer to EU levels, but there is no doubt that the high level of price increases here has put pressure on business in recent years. And slow progress in tackling the infrastructure deficit has also pushed up the cost of doing business here, apart altogether from its negative impact on people's lives.
The other key policy response is, to use the jargon, to try to move up the value chain, bringing in ever-higher value products and processes. The latter requires a broader development of competitiveness in areas such as research and education, as well as tackling issues such as housing and congestion which are limiting growth, hitting living standards and making it more difficult to attract industry to locate here.
There have been some considerable successes in attracting what IDA Ireland bills as "a new breed of high-level projects based on knowledge and the way we use it". This year, for example, companies such as Google, Overture and eBay all announced the establishment of European centres here and a string of companies announced the setting up of global service activities from Ireland. During this year, 23 companies added significant new functions to their operations in Ireland, according to the IDA , and 39 research and development investments, totalling more than €100 million, were approved for grant support.
Meanwhile, Science Foundation Ireland, the Government body which promotes scientific research, has had some noted successes in attracting top scientists to Ireland and has announced a big jump in interest for its research grants programme.
However, the claim from IDA chief executive Seán Dorgan that "Ireland can now convincingly claim to be a knowledge economy" may be a bit optimistic.
Certainly there is an encouraging trend of high-level inward investment. But the recent National Competitiveness Council annual report concluded that "the foundations for transition to an innovation-driven economy remain weak".
Assessing the evidence, it showed that Ireland is still down the international league in key indicators such as the total number of researchers per 1,000 employees (12th out of 16 countries benchmarked), business spending on R&D (11th out of 16 countries), patent applications (10th out of 14 countries), total science and engineering PhDs (sixth out of 12), patents granted (10th out of 11) and production process sophistication (10th of 16).
Moving up the value chain needs to be an ongoing process. There will be difficulties in the transition - for example many of those who lose their jobs may not be qualified for new ones. And clearly Ireland still has work to do to put in place the building blocks for future jobs growth in high-value manufacturing and - increasingly - service industries.
