Ireland's unemployment rate was revised down to 5.3 percent in May from an initial estimate of 5.8 percent, matching its low in February 2008, just before the global financial crisis, figures from the state's statistics office showed on Wednesday.
The revision to the monthly figures followed strong jobs growth in the first quarter, when the number of people in work rose by 2.9 percent year-on-year to 2.22 million, surpassing in absolute terms the previous peak in 2008. The revision also means the unemployment rate has now reached the level where Ireland's finance department forecast it would be on average through 2019 and 2020.
Employment has surged as Ireland's economy recovered from the financial crisis to become fastest-growing in the European Union. At the nadir of the crisis, in 2012, unemployment reached 16 percent. Finance Minister Paschal Donohoe said on Tuesday the economy is not yet overheating, but capacity constraints are emerging as the jobs market approaches full employment, which economists define as the highest level employment can reach without setting off inflation.
However, analysts at Davy Stockbrokers said the drop in unemployment was partly explained by a sluggish recovery in participation - the number of people in the job force who wanted to work. Consequently, it was not a wholly useful indicator of the slack in the labour market. The participation rate was flat in the year to the end of March at 62.1 percent, compared with a pre-recession peak of 66.7 percent.
"The big picture is that the labour market recovery is far from complete, with rising participation and immigration set to be the drivers from here," Davy economist David McNamara wrote in a note. Irish Central Bank Governor Philip Lane, who has also urged the government to plan for possible overheating, said last month he would not become too concerned about the labour market until the jobless rate falls below 5 percent.
Even then, Lane said he would have an open mind, pointing to revisions in advanced economies like the United States, where unemployment has fallen below 4 percent, that show how low the jobless rate can go.