The labour market continued to perform robustly throughout 2023, with the level of employment reaching a record high of 2.71 million in the fourth quarter. The continued momentum in the labour market has been remarkable with almost 90,000 jobs added over the course of last year and around 330,000 added since just before the pandemic. In line with this, the unemployment rate averaged 4.3 per cent in 2023, one of the lowest annual rates on record.
Tight labour market conditions supported wage growth last year. According to the CSO, employee compensation - on a per-employee basis - grew by 4.5 per cent in 2023. With HICP inflation averaging just over 5 per cent, this does imply a real wage decline. However, over the same period household disposable incomes, which takes account of other forms of income as well as the net impact of taxes and government supports, grew by 8.4 per cent, a real increase of over 3 per cent when inflation is taken account of. This shows the important role that government cost-of-living supports played in supporting households.
Looking ahead, wage growth is projected to remain robust in 2024, reflecting some catch up on the real wage declines seen in recent years. The public sector pay agreement and an increase in the national minimum wage will also support wage growth in 2024. With inflation expected to continue to ease over the near term, real wages are projected to return to growth this year, with workers regaining purchasing power. My Department will publish updated macroeconomic forecasts, including labour market and wage projections, as part of the Stability Programme Update next month.
