Anxiety rises as more jobs are lost
The sad loss of jobs announced in Bombardier has increased the sense of unease in the manufacturing sector as it follows the closures at Michelin and JTI. This unease mimics the global markets and in turn, the attitude of international forecasters who have begun 2016 in pessimistic fashion.
Stock markets are tumbling, oil prices are at dangerously low levels (for suppliers) and talk of renewed banking crises and overvalued UK house prices are all signs of a jittery and uncertain economy.
However, outside of the manufacturing news the local economy has been posting good numbers: unemployment is falling, employment rising, confidence is strong and purchasing managers index (PMI) indicators are showing growth.
Why the contrast? Are we not paying enough attention to the wider problems, are the manufacturing troubles a harbinger of what is to come?
The primary reason for the divergence is the strength of the domestic economy. It has been boosted by people with more money in their pockets and a long list of 'wants' that have perhaps gone unmet during the difficult years before the recovery began.
It is pleasing that there is job growth at all in the domestic sectors. They suffered heavily during the recession and they bring jobs across both the region and the skills spectrum.
The willingness to spend the extra money is certainly beneficial to the economy in the short run, but in the long run economic growth cannot be carried on the shoulders of consumers alone.
Job growth in the year to September 2015 was a healthy and eclectic mix of success. Looking at employee jobs, where the data is more reliable, the figures reflect an improving domestic economy but also highlight the strength of the major exporting sectors of manufacturing, ICT and professional services.
The sectoral mix is hugely beneficial in the Northern Ireland context as it results in a broad geographical spread of employment opportunity and is not confined to the urban centres. The strength of manufacturing is remarkable and partly reflects the excellent exporters in this sector but also improvement in the aggregate sectors which are linked to the performance of the construction sector. The appearance of retail, construction and accommodation & food sectors towards the top of the job charts reflect the improving domestic conditions. Sadly these gains were partially offset by losses in the three public services (education, health and public administration), the arts and leisure sectors and the finance sector (somewhat surprisingly).
Looking ahead the prospects for manufacturing will of course be impacted by local jobs losses and the increasing global turbulence may take its toll on other export orientated sectors but it is the fortunes of the domestically orientated sector that is of larger concern.
The ability for the export sectors to grow rapidly enough to give consumers sufficient income to cope with a return of inflation and interest rate rises will be the critical determinant in Northern Ireland's economic performance. Worrying about the period beyond 2016 may seem unwarranted.
Who knows what other changes there will be between now and then, but it reminds us that the encouraging labour market data should not fool anyone into thinking Northern Ireland is 'surviving austerity' and facing a certain future. The push to support a larger private sector to generate more exports and bring wealth into the region from outside is a policy mission that should not be distracted by the short term boost of the domestic economy.
Our own UUEPC forecasts suggest a challenging decade ahead, though corporation tax reduction does provide a welcome boost.
In our Skills Barometer work we looked at an upper scenario for Northern Ireland and projected the skills needs under this 'desirable outcome'. The forecasts projected 95,000 net additional jobs over the next 10 years but it is worth noting our baseline, without a corporation tax reduction or any other accelerated sectoral performance, suggests a more modest 44,000 net jobs. This will not be an outcome anyone will be happy with. Hard work lies ahead and we are about to enter election season - time for us to see what the economic policies are of the candidates for our votes. The electorate are, understandably, becoming more demanding. It will be interesting to see if the manifesto's make more quantified pledges as opposed to the more frequent language of 'improve' 'support' and 'encourage'.
As an economist it is always the numbers behind the words that are critical and helpfully the new Programme for Government will set out ambitious high level targets of what a 'successful' Northern Ireland will look like.
Finally, lest I forget an often quoted line in these columns, we must all ask ourselves what economy and society we would like and are willing to pay for?