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FOR THOSE WHO just read the headlines, the state of Ireland’s labour market is likely quite confusing.
On the one hand, there’s lots of talk about how great everything is. After all, we’re often reminded that we have ‘full employment’ – an unemployment rate below 5% – which is true. And just a few months ago the government was hailing a ‘record year’ for the Irish labour market.
It highlighted good employment growth, a record number of people at work, and how the country has one of the lowest unemployment rates in the EU – again, all true.
But on the other hand, you have nervous headlines about a relatively small, but noticeable, rise in unemployment.
You have companies using the – frankly ridiculous – term ‘job hugging’ to describe employees being too scared to leave their current roles.
But perhaps most disconcertingly, the youth unemployment rate is trending steadily upwards. It increased for eight months in a row in the period to January 2026, rising from just under 12% in May 2025.
There are some concerns that this could be the canary in the coal mine for a softening of the broader Irish labour market. This would likely mean lower wage growth at a time when inflation looks set to rise – bad news for workers.
So let’s take a look at what’s happening.
First off, it’s worth recognising that just because the number of people employed is rising, does not mean that the unemployment rate will fall.
This is because of population growth. Broadly speaking, say the unemployment rate is 5% at the start of the year, and the number of people of working age rises by 60,000 over the next 12 months.
If 60,000 new jobs are created during the year, then the unemployment rate will likely remain unchanged.
As of February, the Irish unemployment rate was 4.6%. To be clear, this is excellent. There will always be a number of working-age people in between jobs, or who may not be currently able to work for various reasons.
Because of that, a rate of 0% is impossible to reach and anything from 5% or below is considered to be a sign that most people who want a job, have one.
After peaking at 15% in 2012, back during the financial crisis, Ireland’s unemployment rate dipped under 7% in 2017 and kept going down.
As recently as September 2024, it was 4.1%. This means that, while it has not grown much, there has been an increase over the past year or so.
Recent research published by the Central Bank also points to a slowdown in employment growth, which it said halved from an annual average of 4.4% between 2022 and 2024 to 2.2% in 2025
It concluded that much of the recent increase in unemployment has been driven by “lower hiring and job-finding rates”.
In particular, it highlighted a fall in “consumer-facing” sectors such as ‘Retail and Accommodation’, where hiring is down by 4% over the last year.
The research also points out that those saying employees are increasingly staying put are correct.
The share of workers remaining in the same job rose slightly towards the end of 2025, which the Central Bank said suggests that workers have a “preference for security in a period of economic uncertainty”.
To bring this back to youth unemployment, which measures the unemployment rate for those aged 15 to 24 (students are not counted).
The Central Bank said research said that the recent slight rise in unemployment was “driven by the youth-age cohort (aged 15 to 24 years), who accounted for 30% of the 14,100 person increase”.
So, why the rise? There are a few possible reasons.
Businesses in the ‘Retail and Accommodation’ sector, such as high-street shops, tend to be the ones which take on people in this age group. If they hire less, then the under 24s will likely struggle more to find work.
This sector has increased sensitivity to changes in consumer spending – if people start to tighten their belts, the likes of high-street shops are often among the first businesses to take a hit. So these companies either cut back on employees or freeze hiring.
The Central Bank had also suggested recently that there could be a seasonal impact to the unemployment rise. The figure tends to peak around the middle of the year, when recent graduates finish studying and begin looking for work.
It is true that the rate was highest in the middle of last year, peaking at around 5% in October 2025. But even with that recognised, there is still an underlying increase.
Finally, we have the drop-off in ‘job churn’. As discussed, more people are currently staying put in their current roles.
The under 24s are just starting off in their careers, so they rely on vacancies “at the lower end of the job ladder”, as researchers put it.
Fewer people switching jobs essentially creates a trickle-down impact where there are less lower-level roles opportunities available. Again this was highlighted by the Central Bank, which said that reduced hiring and lower job mobility “disproportionately limits employment opportunities for new labour market entrants”.
To top it all off, Ireland’s youth population is still quickly expanding. There are just over 700,000 people in the country aged 15 to 24, up from about 560,000 in 2012, when many young people were forced to emigrate.
The figure is expected to peak at just over 750,000 in 2031 as Ireland’s overall population continues to rise, driven mainly by high inward migration.
In the coming decade, younger workers could be in higher demand as the population ages and businesses in the likes of ‘Retail and Accommodation’ struggle to find staff. But for now, companies have a growing number of young people applying for new roles, increasing competition at a time when demand is softening anyway.
That last point is of little good to people currently aged 15 to 24 who are looking for work right now. But it does give some indication that the rise in youth unemployment may not be an uninterrupted upward line in the future.
Where the rate will go is tricky to call. The hiring of many youth-friendly businesses is dependent on the broader economic climate, which can shift rapidly. How many people were talking about war in Iran a few months ago?
However, many of the factors which have made the landscape tougher for young people to find a job are of significance to the broader labour market, such as a general hiring slowdown and a reluctance from workers to leave their current roles.
It’s hard to say if this is the canary in the coal mine, but the possibility is certainly there.
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