Unemployment in the Republic is rising at a faster rate than in most EU states, and is likely to exceed 100,000 this year, FÁS has predicted.
In a gloomy assessment of the labour market, the agency suggests the true extent of unemployment has been masked by factors including reductions in working hours.
Many employers, it says, have adopted a "wait-and-see" approach to the economic decline by cutting down on overtime.
"However, the longer the slowdown persists, the more likely that this practice of 'labour hoarding' will be replaced by a more radical reduction in staff numbers."
In a quarterly review of labour market trends, FÁS also predicts that fewer people will be working in the State by the end of the year.
The bad news for workers does not end there. The review also predicts that at least some private sector employers will plead inability to meet the pay terms of the new national partnership agreement, Sustaining Progress.
The outlook will become even worse, it suggests, if a major setback in the world economy arises from a war in Iraq.
Chemicals, the review says, is the only manufacturing sector expecting to increase job numbers in the short-term. "And given that public service recruitment has been capped, the potential for future employment growth seems limited."
The review, the first of its kind carried out by FÁS, the State training and employment agency, says employment growth "slowed appreciably" last year, mainly due to a shrinking industrial sector. Any jobs growth that did take place was largely in the public sector.
The unemployment rate increased from 4 to 4.5 per cent by the end of the year, and is likely to exceed 5 per cent this year. While this remains well below the EU average of 7.5 per cent, the rise has been "more rapid than (in) most of our European counterparts".
The increase in long-term unemployment last year, the study adds, was the largest since 1993. At 1.3 per cent, however, the rate remains "extremely low" by both historical and international standards.
While the numbers employed increased by 1 per cent, the average working week continued to shorten, from 37.8 hours in the last quarter of 2001 to 37.4 hours in the final quarter of last year.
In fact, the review points out, the total number of hours worked in the economy fell slightly in 2002. "It might be argued that this reduction in the length of the average working week constitutes a form of 'hidden unemployment'."
Earnings growth, says the review, has remained strong, especially in the construction sector, but is likely to "moderate significantly".
"While the proposed national pay agreement, Sustaining Progress, envisages a 7.2 per cent pay rise over 18 months, this will not necessarily be fully implemented by all firms, particularly those in the traded sector, some of whom may invoke the 'inability to pay' clause."
