The number of people claiming unemployment benefit in Ireland rose by just 600 in September, the slowest rate in nearly a year and a half, boosting the government two days ahead of a crucial EU referendum. Official data on Wednesday showing 429,400 people claiming unemployment benefit, barely changed from last month, also bolstered expectations of a surprisingly fast end to recession.
-- Rate of increase slowest since April 2008
-- Reinforces view that recession is bottoming out
"The government can point to the fact that the economy hasn't turned out to be quite as bad as was feared and at the margin that helps their cause," said Simon Barry, senior economist at Ulster Bank. "It clearly represents the continuation of an encouraging trend and it is reinforcing the message from other indicators that are pointing in the same direction."
Opinion polls suggest Ireland will ratify the Lisbon Treaty in a referendum on October 2 but there are concerns the result will be tight due to widespread disquiet over the government's handling of the economic crisis. Analysts have warned Ireland's borrowing costs will balloon and its international reputation will tank if the country rejects the charter for a second time.
Some economists are now forecasting average annual growth next year in Ireland, compared with previous expectations that 2011 would be the first full year of recovery, after a slew of indicators, including retail sales and exports show signs of resilience.
The estimated unemployment rate inched up to 12.6 percent in September from 12.4 percent in August. The significant slowdown in the numbers signing on, 600 in September compares with an average monthly increase of nearly 17,000 in January-August, will also mean much-needed savings for the 2010 budget.
"For 2010, the updated projections for the budget will pencil in the number of people signing on in 2010 as being on average 100,000 lower than the government had anticipated in April," said Ronnie O'Toole, chief economist with National Irish Bank.
"This will result in significant savings in the social welfare budget, and should support income taxes and VAT revenues next year." Finance Minister Brian Lenihan needs to squeeze 4 billion euros in savings from next year's budget but public sector trade unions have warned they will strike if he tries to cut jobs and wages to tackle the worst public finances in the euro zone.