Recruitment: A Barometer Of The Economy
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by Michael Lantry
IT Jobs and Recruitment Insights
I wrote a blog in 2023 about how the performance of the recruitment industry is an incredibly accurate barometer of economic performance. It makes sense, since recruitment agency services are really only in demand when there are hiring needs. We saw recruitment agency revenues fall off the cliff across most industries during Covid. We then saw incredible demand for recruitment services post covid as companies were in growth mode and hiring as fast as possible. This phase ended towards the end of 2022 in Ireland.
Since then, we saw a significant reduction in demand for recruitment services across many industries like IT, financial services, retail and manufacturing. Some segments of the economy continued to be busy like Data Centres, construction and pharma.
As we near the end of 2024, the recruitment industry is reflecting a wider economic sentiment of caution and uncertainty. Ultimately, there are a number of factors that are making employers very careful about hiring and growth. In this blog I will outline some of the key factors right now that are causing this. I will focus on the tech sector specifically, as this is where GemPool plays. But many of the factors outlined will apply across the entire economy of Ireland.
AI
The initial ChatGPT ‘mania’ that saw them grow from zero to one million users in two months has abated. Since then the enthusiasm has slowed but the game has very much changed. All the investments being made and focus on AI will undoubtedly bring about huge disruption across many industries. What this means for the tech sector is that employers are seeking to find the productivity gains claimed by products such as Co-Pilot rather than invest in more Software Engineers. In GemPool we host regular CTO networking events and anecdotally there is a consensus that these AI tools are not quite there yet, but will probably get there. For tech talent, this is a warning sign. What skills will become redundant and which ones will be sought after over the coming years?
This caution around hiring more tech talent does have a knock on effect to the Irish economy. A large portion of the foreign direct investment that comes into Ireland through the great work the IDA does, is with US tech companies. They are simply not hiring as much as they did in the past. This will mean fewer high paying jobs, lower income tax numbers and less focus on Ireland as a centre for technology excellence in Europe.
Housing Crisis
This remains a huge issue for the Irish economy and can be clearly linked to the performance of recruitment agencies. Many years ago, at GemPool, we would have seen a much higher percentage of our placements coming from candidates relocating to Ireland. This has not been the case now for a while, and is the shared experience across the industry. One of the biggest factors impacting this is the cost of living and availability of housing. It's not as easy for a young professional to come to Ireland for their next adventure. This drives down the attractiveness of future FDI investments into Ireland, further stifling economic growth. We have benefited hugely in Ireland from a vibrant tech sector which attracted talent from all over the world. This isn't happening as much in 2023 or 2024.
Conflict
Employers are rightly concerned about the various conflicts going on and the potential escalations of these. In the middle east and Ukraine in particular there does not seem to be peaceful solutions on the horizon. This drives up caution and concern. This means less spending on growth plans and encourages companies to store cash and control costs as much as possible.
Elections
There are big elections in the US in November and probably in Ireland too. We are just waiting for the date to be set. Again, this uncertainty does create caution. With all the US companies with a presence in Ireland, they want to see who will be president. If Trump gets in, they will be worried about a ‘bad’ tweet about their company which can really hurt them. Again this will create caution until there is more certainty.
The reasons stated above all point to reasons why employers are more cautious about hiring right now and why we are seeing a recruitment market in Ireland that is slower than we would like to see. However, there are also reasons to feel that things might be better in 2025. Here are three.
Inflation Going Down
Inflation is moving back down. Simply put, this makes money cheaper and drives investment into the economy driving activity, which will result in more hiring.
Unemployment levels very low
In the recent CSO labour force survey for Q2 2024 the unemployment rate in Ireland is at 4.6%. This is still incredibly low. It has snuck up slightly, but it suggests that there is work out there for anyone able to work and wants to work. This will drive a solid economy. If we saw the rate going up a lot, this would be a big cause for concern. This is reflected in the recruitment industry as we have not seen a big flow of candidates into the market. There are more candidates than perhaps the end of 2021 into 2022, but there is still a skills shortage. This drives up the need for employers to use recruitment companies to help them find talent.
M&A Activity
There have been a flurry of acquisition announcements in Ireland recently. This hopefully points to a positive with more investment and confidence growing. We have recently seen LetsGetChecked buy Truepill, Storm Tech acquired by Littlefish and MJ Flood by Viatel. Hopefully this means more jobs and demand for tech talent in 2025.
So overall we can directly correlate a sluggish recruitment industry in terms of demand for talent to the factors outlined above. It feels like the market is waiting for a trigger or indication that things are improving, which will further fuel growth and spending. This will mean more business for recruitment companies. There is business there, and companies are using recruitment services, but not at the rate of 2021 or first half of 2022. There is caution as employers try to find a clear trend or direction of travel for the economy. There are reasons to be optimistic about the performance of the economy and recruitment industry in 2025. Time will tell how this all plays out. I will follow up next year with another blog on this topic to reflect on what actually happened, why and what this means for the economy as a whole.
If you want to learn more about GemPool or get more insights, please contact us or check out career insights page.
