No flights of fancy - we are airborne!

Back in late 2007 and 2008 the talk was of a soft landing. Evidence abounded of the impending downturn, but very few people called it as it was - a disaster of grotesque proportions just around the corner. Just why we thought the landing would be soft, is hard to recall. Looking back at the numbers from leading edge industries and sectors, the picture was abundantly clear – we weren’t so much heading for a soft landing as hitting a brick wall, falling off a cliff – choose your metaphor, the clear signs were there that the trip was over. However, after five years of mass unemployment, sectors destroyed and beatings from our EU and IMF colleagues, I believe we've finally come out the other side. To explain my reasoning I need to take us back to where it all began.  

In early 2007 the streets were full of BMWs and Mercedes and regular people were deciding on whether to go for that third or fourth property. In the Hays offices, we were flying around the world trying to find architects and engineers from the Far East and Africa to import into Ireland. Our offices were packed with Eastern Europeans flooding over to fill the labour void on the huge development sites of the South Docklands and elsewhere.

By July it had stopped dead in its tracks. The phone was still ringing, but it was Irish architects looking for a move as their firm’s prospects suddenly looked bleak. Anyone in housing was getting out quick, and then, in October activity froze in a recession that hit the entire construction sector like a tsunami. Eighteen months into the recession a sector that accounted for over 10% of GDP and employed over a quarter of a million people had halved in output and lost half its employees. Some soft landing!

Looking back is instructive whilst trying to figure out what might be happening now in the economy, and, more importantly, what might happen next. The recruitment sector is often overlooked as a key indicator of changes in the economy, but I would argue it’s the first place to look. Staff numbers are the mercury in the economic barometer because they are directly linked to business confidence.  We see defined stages in the economic cycle. In a downturn businesses see a reduction in workload, hiring activity goes on hold, new enquires for permanent staff dry up. Then, as the situation worsens, temporary staff are let go, followed by non-core permanent staff and then, perhaps finally, wholesale redundancies.

All this played out throughout 2007 and 2008, with the recruitment market bottoming out in spring 2009. Since 2010 the sector has been growing, quietly, but steadily and significantly. Now, in 2013, something is happening to that growth that is more significant and, I believe, portends the start of a significant shift in the wider economy.

If we take the graph of hiring activity as an accurate portrait of an economy in decline, then the same can be done for an economy in recovery. The very first thing we would expect to see would be a pick-up in temporary hiring activity, as companies cautiously add numbers. Temporary staff are used to circumvent corporate headcount quotas or to simply cover skills gaps on specific projects. They also provide a tentative re-entry into the labour market when prospects pick up. We have already seen this happen in the IT and finance sectors, both of which are characteristically ‘employment resilient’ in a recession. But now we are seeing it elsewhere, crucially in construction. There is a spring in the step of the partners of those surviving firms of architects and engineers in Dublin. They have work on the drawing board, and their response is evident in the calls we’re getting for short term staff and fixed terms contractors.

This summer two things happened which give me the confidence to state that the economy is undergoing a significant shift in momentum. Overall, cross-sector numbers of temporary workers are almost back to pre-recession levels. Secondly, and most significantly, the source of this momentum comes from the construction sector.  Temporary workers in construction are up 40% compared to this time last year, the biggest growth rate of any sector in which we recruit. It was also reported recently that the large cranes that were once synonymous with the Dublin cityscape have seen an increase in hires by 10%. This only happens at the start of an upturn, and the pace at which it is happening tells me that we are at the critical point of the recovery where, having been parked on the apron for three years, we’re motoring down the runway and primed for take-off.

Talk to the right people, in the right businesses, and they will tell you the same thing. Property recovers first at the top end and in South Dublin property is moving, and moving rapidly; prices are up, sharply. There is an absolute dearth of high quality commercial space in the City and foreign money is acting on this opportunity. The buzz of international financiers hovering around Ireland has turned into a frenzy of activity.

The service sector is growing at its fastest rate in six years and new export orders grow for the 25th successive month. PwC's 2013 CEO Pulse Survey showed business confidence in the Irish economy at its highest level since 2007. Add this to the sustained recovery in employment numbers on a base of three years uninterrupted economic growth, and the start of a recovery is undeniable.

Yet, just as no-one diverted from the ‘soft-landing’ script in 2008, no-one is calling the recovery now. Caution is the watchword, and we’re quick still to fasten to the grimmer aspects of our immediate situation than to focus on the brightening light on the horizon. But it’s clear to me that the recovery has started to take off and we are airborne again.

Hays are hosting a breakfast panel discussion entitled “2013 growth, are you seeing it?” Liam Diamond, the International Tax & Inward Investment expert at PricewaterhouseCoopers will join Goodbody’s Chief Economist Dermot O'Leary and other panellists to give their views and answer questions on where the economic growth is coming from and how businesses can take advantage of the green shoots. For more information and to register go to hays.ie/2013growth

For further information about Hays visit www.hays.ie