Writing this time last year, I looked forward with trepidation to 2013 as another ‘year of living dangerously’. Risks abounded. Every silver lining presaged a cloud. The path ahead was strewn with banana skins and danger lurked around every corner. It’s not for nothing they call economics the dismal science!
Confounded by years and years of growth falling short of forecasts, of the recovery on the horizon being just another mirage, economists can be forgiven maybe for feeling that stagnation was the new normal.
But, could this time be different?
Most people judge the state of the economy by how much money is in their own back pocket. And the biggest determinant of that is whether they have a job and, if they do, how much they get paid for it.
So, how do those numbers look?
Well, the good news is that after years of precipitous decline, the numbers at work are growing faster than at any time since the boom years – more than 2,000 new jobs a week in the six months to the end of September, most of them full-time. This is unequivocally good news. It means unemployment is falling fast – and not just because people are emigrating or giving up on the job-hunt.
On earnings, things are less rosy. Average weekly earnings dropped sharply, by €20, in the three months to the end of September, falling to their lowest level since the crisis began, while the number of hours worked continued their marginal decline.
When inflation and tax hikes are factored in, real disposable incomes remain under severe pressure. So, while it is great news that there are tens of thousands more people at work than this time last year, for the vast majority of people – at least for people who don’t work in the ICT sector – any economic recovery is still a statistical phenomenon bearing little relation to their daily lives.
But, with the troika gone, surely 2014 will be the year we see a real recovery?
Well, let’s hope so, but for all the positive news headlines about the end of the bailout and ‘regaining sovereignty’, any recovery in 2014 is likely to be relatively modest, with wages struggling to keep pace with increases in prices and taxes. But, if the economy continues to generate jobs at the pace we have seen in recent months, then there is a chance that economic growth could bring a positive surprise for a change in the New Year.
More jobs means more income for families, better sales for businesses and higher tax revenues for the government. In a virtuous circle, this momentum can in turn generate more jobs and, eventually, lead to higher wages for everyone as what Karl Marx called the ‘reserve army of labour’, the unemployed and under-employed, gradually shrinks. As the size of the economy increases, and incomes nudge higher, we will even begin to see that there is ‘life after debt’ as the burden – for firms, families and the country as a whole – becomes more manageable.
None of this is to say that we have ‘turned a corner’, yet alone that the boom times are on their way back – irrespective of what you may read about house price bubbles in South Dublin – but there is a growing sense that when we round the next corner, we may be in the clear. Not home free, but on the way to the real recovery in living standards that the country so dearly needs.