Public Policy Bulletin, 29 May 2020

May 29, 2020


In today’s bulletin, latest CSO figures highlight the adverse impact of COVID-19 on the Irish labour market, with the adjusted unemployment rate going over 28 per cent. Also, a latest Government paper, Economic Considerations for Reinstating Economic Activity, gives further insight into the sectoral impact of the COVID-19 pandemic. You can also look at the European Commission’s proposal for a major recovery plan ‘Next Generation EU’, and the ESRI’s latest quarterly economic commentary urging further investments.

Ireland’s labour market bears the COVID-19 brunt, show latest CSO figures

Labour Force Survey data for Quarter 1 2020, published by the Central Statistics Office (“CSO”), capture the impact on the labour market from the COVID-19 pandemic for the first quarter of 2020. These results show that over 70 per cent of those aged between 15-64 years were employment in the first quarter. However, when the effects of COVID-19 are taken into account, the employment rate comes down to 61.1 per cent.

The top takeaway points from the survey are as follows:

  1. The COVID-19 adjusted rate considers layoffs, that may be officially classified as either unemployed, in employment, or outside the labour force altogether depending on the individual’s circumstances.
  2. Results for Q1 2020 show that the employment rate for those aged 15-64 years was nearly 70 per cent, which saw a further decline as a result of the COVID-19 pandemic. This was coupled with an unemployment rate of 4.7 per cent for the same demographic.
  3. At the end of March 2020, the adjusted employment rate fell was 61.1 per cent, while the adjusted unemployment rate was over 15 per cent
  4. By the end of April 2020, the adjusted employment rate fell to 51.4 per cent, with the adjusted unemployment rate going over 28 per cent

Commenting on the figures, the Minister for Finance and for Public Expenditure and Reform, Paschal Donohoe T.D., said: “Today’s figures confirm that Ireland’s labour market began to feel the negative effects of COVID-19 towards the end of the first quarter of this year… Thereafter, the situation in the labour market should gradually improve, in line with the recently published Roadmap for Reopening Society and Business, with unemployment steadily falling. My Department is projecting the unemployment rate to approach 10 per cent by the end of the year, with an average unemployment rate of around 14 per cent across the year as a whole.”


Economic Considerations for Reinstating Economic Activity in Ireland

The Department of Business, Enterprise and Innovation in conjunction with the Department of Finance and the Department of Public Expenditure and Reform have released a paper; Economic Considerations for Reinstating Economic Activity, which provides an assessment of the economic impact of the COVID-19 pandemic focusing on those sectors of the economy that have been most heavily impacted. Read the paper here.

The report highlights that the most heavily impacted sectors are accommodation and food, construction, administrative and support services, wholesale & retail trade, and other personal services. Other sectors where the impacts are significant but somewhat less severe (“medium impact”) include the manufacturing sector, and transport and storage. This pattern of sectoral impacts is similar to that observed in other countries; sectors where remote working is not feasible or that require personal contact with consumers are hugely exposed to the necessary travel and other restrictions that containment of the virus requires.


European Commission publishes proposals for major recovery plan

On May 27, the European Commission put forward its proposal for a major recovery plan. The European Commission is proposing to create a new recovery instrument, Next Generation EU, embedded within a powerful, modern, and revamped long-term EU budget.

The Commission is proposing to harness the full potential of the EU budget, combining Next Generation EU (€750 billion) and targeted reinforcements to the long-term EU budget for 2021–2027, to create €1.85 trillion. The Commission has also unveiled its adjusted Work Programme for 2020, which will prioritise the actions needed to propel Europe's recovery and resilience.

European Commission President Ursula von der Leyen said: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment.”

The money raised for Next Generation EU will be invested across three pillars:

1. Support to Member States with investments and reforms

2. Kick-starting the EU economy by incentivising private investments

3. Addressing the lessons of the crisis

All of the money raised through Next Generation EU will be channelled through EU programmes in the revamped long-term EU budget:

  • The European Green Deal as the EU's recovery strategy
  • Strengthening the Single Market and adapting it to the digital age
  • A fair and inclusive recovery for all

Visit the European Commission’s website for more details on the announcement to repair and prepare for the next generation.


Latest ESRI report urges “investment over cuts” in the short term

The Economic and Social Research Institute (“ESRI”) has described the COVID-19 outbreak as a major shock to economic life which is unprecedented in modern times.

In its Summer Quarterly Economic Commentary, the think tank urged the Government to stimulate activity in the economy. It is urging investment over cuts in the short term as this will reduce the 'scale and impact' of the crisis on the domestic economy over the next 18 months.

It specifically urged the Government to invest in social housing and retrofitting homes, to catch up with the underlying demand for housing and to help Ireland reach its climate goals.

Among the points the ESRI raised were:

  • Unemployment this year to average 17 per cent
  • Necessary investment, as well any extension to the pandemic unemployment payments, will increase the deficit, which it expects to be around €27 billion this year, although it recommends no immediate change to the pandemic unemployment payments
  • Household savings may double during the pandemic, which could deliver a boost to the economy, once a recovery begins
  • Supports for business will be difficult for government to get right with difficult choices being required
  • Not all firms will survive

The ERSI described the best-middle case and worse case situations as follows:


% economy risks contracting by

% unemployment risks reaching:

Best-middle case

9-12 per cent

10-17 per cent

Worst case:*

up to 17 per cent

20 per cent

*where a second surge of the virus emerges


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