Ms Laura Weymes:

In 2016 to date relatively robust employment levels have been recorded, with the numbers at work having rebounded to levels last seen at the end of 2008. Some 180,000 jobs have been created since the low point of the crisis. Outturns in the second quarter of the year marked the 15th successive quarter in which there was employment growth. Importantly, it remains broad-based, with expansion across 12 of the 14 sectors of activity, for which figures are recorded by the CSO.

On the outlook for employment, data for economy-wide vacancy rates augur well for employment growth in the coming quarters of the year. With no further momentum beyond what we have seen in the year to date, this would imply annual growth of 2.3%. Our forecast of 2.6% factors in a slight softening in the second half of the year and is consistent with the creation of 52,000 jobs in annual terms. Employment growth of 2.1% is forecast in 2017, which is very much in line with the outlook for underlying domestic demand within the economy. Unemployment continues to decline, although the pace of reduction has been somewhat muted throughout 2016, reflecting a labour supply response which is beginning to gather pace in response to improved labour market conditions. The first half of the year saw labour force growth of 1.1% and our outlook for the year as a whole is for growth of 1.3%, unchanged from our last published forecast in April. Despite evidence for persistence in the rate of unemployment in the year to date, the number of persons unemployed continues to fall, with 23,000 fewer unemployed relative to this time last year. Overall, in 2016 we are projecting an unemployment rate which will decline to 8.3% and fall further to 7.8% in 2017.

Slide 24 shows that rising participation rates can be expected to drive expansion in the labour force this year, a phenomenon we are seeing for the first time since 2013. We are beginning to see evidence of a long-awaited pick-up in participation rates which rebounded in the second quarter largely on the back of females who had been within education during the crisis returning to the labour force. The cyclical pick-up in participation rates points to evidence of a strengthening labour supply response to improving overall labour market conditions. Demographics and inward migration are expected to contribute progressively to the expansion of the labour force in 2016 and 2017.

Slide 25 shows the outlook for wage dynamics. Our forecast is for a modest pick-up in wage growth, with wages projected to expand by just over 2.5% per year in the medium term. Hourly pay rates are forecast to evolve broadly in line with productivity trends over the period and the short-term outlook for the wage bill is for continued growth underpinned by broadly balanced contributions from wage rates and numbers at work.