Unemployment rate grows to unusually high level in Ireland

Jobless rate in Ireland increased to 4.8 percent for the last month that undermines people's confidence in the economy. 

Photo: Unemployment rate grows to unusually high level in Ireland

A Central Statistics Office report said the number of people claiming unemployment benefits has risen by 9,000 this year to 164,700, among them about 18,500 people who are working part-time or in casual jobs.

It noted that Ireland's unemployment rate has been gradually building since its recent low point of 4.2 percent, reached in October 2006.

Unemployment last peaked for a single month at 4.8 percent in July 2003. But economists and the government agree that, this time, Ireland is on course to reach 5.5 percent unemployment in 2008 as its long-booming economy slows.

Another report published Tuesday documented how Ireland's current reversal in property prices following a decade of phenomenal rises and mushrooming household debt is undermining confidence in the future.

The monthly Consumer Sentiment survey, compiled jointly by the Economic and Social Research Institute and Irish Intercontinental Bank, said the public's confidence in the economy fell last month to a four-year low.

The report said people widely feared that this year's slowdown in home-building, and approximately 5 percent declines in property prices, would inflict wider damage on Ireland's construction-driven economy.

Irish Intercontinental Bank's senior economist, Austin Hughes, said people laden with mortgage and credit-card debts were pinning hopes on an eventual cut in interest rates by the European Central Bank in Frankfurt.

"A break from regular rate increases and even tentative hopes of still distant rate cuts appear to be a very important silver lining in an increasingly dark and cloudy economic sky," Hughes said.

The Cabinet of Prime Minister Bertie Ahern, which held its weekly meeting Tuesday, declined to comment.

Opposition leaders accused the government of squandering its past decade of budget surpluses. Ireland this year has resumed deficit spending because of a rapid decline in tax revenues from property sales.

"This government's employment strategy has been entirely based on a debt-fueled construction boom and an unsustainable expansion in public spending," said Leo Varadkar, a lawmaker from the main opposition Fine Gael party.

But one of Ireland's leading economists, Alan McQuaid of Bloxham Stockbrokers, said the air of pessimism was unjustified.

He said Ireland's unemployment rate remained far below the current euro-zone average of 7.3 percent, and the economy was still expected this year to create more than 70,000 jobs, adding 3.7 percent to the work force.