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The usual stream of bad news saw two pieces of good news today – the first being the fact that unemployment actually slightly decreased by last month. The reduction in the numbers signing to the Live Register was in fact quite small – four hundred and forty three thousand, two hundred compared to  a figure of four hundred and forty six thousand for the end of two thousand and ten.

This is only a slight increase, but hopefully it is one that reflects an improvement in economic conditions. The more cynical – or astute – might claim that it is a due to massive emigration, and this is of course probably true. The headline figure for those on the Live Register would no doubt far exceed this if we did not have the valve of emigration.

The other piece of good news today is the fact that the Industrial Development Authority saw a marked increase on the amount of inward investment in two thousand and eleven. There was also a corresponding increase in employment in IDA supported companies. Inward investment saw a thirty per cent increase on two thousand and ten, while there were thireteen thousand new jobs added in IDA supported companies. This was an increase of twenty per cent on two thousand and ten when there were ten thousand , nine hundred new positions created. Once the shake out of job losses over the year in IDA supported companies is factored in, there remains a surplus of six thousand one hundred and fourteen new jobs created over the last year.

Companies that had sizeable investments in Ireland over the last year included  Intel, Twitter, IBM, Pay Pal, CocaCola, Amgen, Pfizer, Analog Devices and  VMware. Twitter was an especially welcome addition to the pantheon of digital heavyweights that are making ireland their European headquarters. The fact that Ireland can create a cluster of such heavyweights is compelling evidence that Ireland is a suitable destination for inward investment. Further endorsement of Ireland lies in the fact that Intel is creating a half a billion euro expansion of its plant in Leixlip. These are the precedents that will hopefully attract further investment to Ireland.

Germany Says No

Humans, on the whole, have a natural propensity towards optimism. If we didn’t, we would never have endured the periodic freezes that punctuated our existence – as our distant ancestors stared at a bleak iced over tundra from the mouths of their caves – as those who have lost their jobs might now be staring out their windows at a bleak overcast commuter estate –  they would have thrown in the towel (or bearskin) if they didn’t have this inclination to hope for better. In fact Anthropologists believe that it was in times of climatic change that we saw major spurts in our evolution – that is the thing about humans: we fight our way out of adversity.

As we will with the current economic crisis. The writer’s natural optimism figures that the Senior Eurocrats have a plan, most likely in the form of the collective issuance of Eurobonds, however it is waiting till the last possible moment before it enacts this plan, as in the interim the basket case countries are implementing austerity and reforms that they would not be inclined to implement if they felt secure in the knowledge that there is a safety net of Eurobonds. This is what is termed Moral Hazard. If they keep the conditions arctic, we will put our heads down and take the pain. If they show us some respite, then we will promptly demand a pay rise and book the sun holiday.

According to today’s Daily Telegraph Europe is owning up to a plan – it appears that the first technical discusions are being had on what it terms ‘stability bonds’.

Germany is of course reluctant to agree to universal bond that will see a higher rate imposed on its bonds. However, the imperative is relentless – Spain is beginning to suffer impractical spreads on its bonds. Whatever about Germany’s reluctance, or the reluctance of the seventeen nations of the eurozone to surrender something of their fiscal sovereignty, circumstances are passing them by – it will be a choice between a compromise or disaster.  However, from the prow of this sinking ship the German finance minister stridently protests about the dangers of moral hazard. The idea of the lazy Greek resuming  the indolent life of living off the fat of German land has become the German nightmare.

In that the Government has committed itself to protecting the base rate of social welfare payments – regardless of the fact that they appear to surpass the amounts paid in most of our European Union partner countries, including the UK which appears to pay out just half of what Ireland pays – the Department of Social Protection is scrambling to find cuts in other areas that will shave seven hundred million from the annual budget.

While, of course, in an ideal World it is ideal to be able to pay out high social welfare payments, the Department seems to be shifting the burden of cuts onto the private sector employers and this policy can only serve to further strain company cash flows and jeopardise existing jobs and future job creation.
The banner proposal is to compel employers pay the first month of an employees sick leave, regardless of pre-existing employment contracts.  This is estimated to shave one hundred and fifty million off the Social Protection bill each year.

Further announcements include the fact that Public Sector will see some constraints applied to their rates of annual leave, with minimum allowances being reduced to a minimum of twenty two days per annum to a maximum of thirty days depending on grade.

There doesn’t seem to be any clarification at this point as to whether this will be only applied to new entrants to The Public Sector – if so, unlikely to make much difference as there is an ongoing hiring freeze – or if it is something that is to be applied to existing Public Sector workers. If it is a case that it is to be applied to existing workers, there will no doubt be the usual digging in of heels by the Unions. Their recalcitrance in the face of such issues has already been evident in the battles they fought over the eighty something leave days per annum that FAS workers have been entitled to in the years preceding retirement – this to all sane people is a ludicrous situtation, explained away as necessary to prepare FAS workers for the transition to retirement – nevertheless, the unions thought it justifiable and fought to maintain this. If the Governentt is to continue the destructive policy of squeezing more cuts from the private sector, it is only because they are eternally intimidated by these barmy Public Sector union officials.

Well here’s some good news from Reuters – Ireland has been the only Euro Zone country not to see a decline in manufacturing activity in October.

This report is based on the NCB purchasing manager index which showed that the Irish Manufacturing sector saw a marginal increase in production last month. This is the first increase that the sector saw in five months, and the report is based on an increase in new orders from export markets.

This puts Ireland in stark contrast to other Euro Zone countries where the decline in manufacturing has proved to be worse than previously thought. The Eurozone Purchasing Managers’ Index has seen a decline from a figure of forty eight point five in September to a figure of forty seven point one for October. This is indicative of the relentless slide towards recession that Europe seems to be suffering.

Meanwhile, the Purchasing Managers’ Index in Ireland has managed to remain above the fifty mark for the third month running – to ride above fifty indicates that an economy is in growth which to dip below it indicates economic contraction. By comparison, the wider Eurozone has seen the Purchasing Managers’ Index stubbornly remain below the fifty mark, with a figure for factory output declining from forty nine point six to forty six point six for October.

The contraction extends even to Germany, and that news along with a threat to France’s credit rating, is singularly ominous for the ‘Euro Experiment’. Add to that a sudden increase in unemployment in Germany, and the one certainty is that we live in ‘interesting’ times. It is actually a Chinese curse to say: may you live in interesting times!

In the past, Ireland managed to sit out the European dark ages – a little ‘keeper of the light’ on the periphery – but even with these instances of good news, Ireland will find it hard not to be affected by the upheavals that are convulsing the European mainland, or more specifically the Eurozone. An essential requirement for an export led recovery is to have a thriving export market. It won’t be only our Euro export markets; there is the potential here for a crises that can ripple out to The UK, America and beyond.

There is no doubt that it will be the small business sector that will create the jobs that will shrink that stubborn 14% unemployment rate. This economy will recover one job at a time and not so much in the tranches of jobs that come with the big Media tailored announcements.

The major impediment to steady jobs growth in this economy lies in the difficulties that the SME sector faces. The fact is that small business in Ireland face a perfect storm of squeezed off credit and poor consumer sentiment. If credit can be restored well then all else will follow, however banks are keeping a very tight hold on the purse strings, partly to meet the stringent liquidity rules that have been imposed on them by regulators.

Even with that, a recent report from IBEC shows grounds for optimism. IBEC undertook a business sentiment report in early October, and the main points of interest in this report are that at least half of Irish businesses intend to retain all of their staff in the coming three months, while a quarter of all businesses surveyed intend to hire new staff in the coming months.

Unfortunately though, it seems that Multinationals hold a deficit of optimism over Indigenous business, with the ICT and Medical Devices sectors proving to be the most upbeat. Indigenous Irish business with an export function are doing well, and are most optimistic – they have been busy in the last few years gaining competitiveness and leveraging new markets. In fact, all of Irish business have been actively involved in the last few years in cutting the slack in their operations and gaining competitiveness and this has helped lift the balance sheet and as a consequence managerial optimism.

In light of ongoing turmoil in Europe, the very fact that Irish business can maintain this optimism and increase exports suggests that the Irish economy might be straining at the leash, and that if a solution can be found to all of this uncertainty around the Euro the Irish economy will see a massive surge of growth, and a consequent diminishment in employment. At least it’s nice to think that might be the case.