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Home » Blog » Low Unemployment Rate But High Number Of People Economically Inactive

Low Unemployment Rate But High Number Of People Economically Inactive

March 4, 2025 By //  by Des Ingham Leave a Comment

The unemployment rate is at a historically low rate in Northern Ireland, which on the face of it is great news for people who have been able to find a job that fits their skills and qualifications. According to the most recent statistics the unemployment rate is just 1.6% here, which compares favourably with the rest of the UK where the rate is 4.4%.

However there is another statistic which could be seriously holding back the economy, and that is the percentage of people that are economically inactive, in other words those that are not in work but are not looking for a job either. These people are either on the long term sick, are looking after family members or have retired early. So the actual employment rate, taking into account the whole working age population, is 72% in NI, compared to 74% in the UK overall.

So what does this low unemployment rate and a high number of people being economically inactive mean for businesses and the economy?

Hard To Find The Right Person From A Low Number Of Candidates

Here is what Hannah Martin, an economist at the Danske Bank, writes about this situation, in an article she has written on the Irish News website. She says:

“For businesses, the impacts of a low unemployment rate are clearer. Hiring from a very small pool of potential employees lowers the chances of being able to match the right candidate to the necessary skillset for the role, especially for highly skilled and niche areas.

“The Northern Ireland Chamber of Commerce and Industry and BDO Quarterly Economic Survey consistently reports the hiring difficulties faced throughout the manufacturing and services sectors, with the latest Q4 2024 survey suggesting nearly 8 out of 10 such firms are having difficulties recruiting.

“And the latest Skills Barometer from Ulster University suggests that there could be continued difficulties regarding recruitment, with the report outlining an estimated shortfall of around 5,400 individuals a year to fill vacancies over the next eight years in its high growth scenario.

“If businesses can’t access the skills they require, that can weigh on productivity and ultimately on economic output levels over the longer-term.

“A new macroeconomic model, created by the Economic and Social Research Institute and the National Institute of Economic and Social Research, supported by Ibec, has suggested that the economic growth rate in Northern Ireland could slow from its current levels over the coming years, in part due to the expected fall in the number of people in the labour market.

“To overcome these challenges and improve the long-term potential capacity of the economy, what we need is a further increase in the rate of people who are in employment and an increase in the rate of people not in a job but who are looking for work.

“A rise in the unemployment rate here wouldn’t necessarily mean that people are losing jobs, as this could occur alongside the continued jobs growth that is expected in Northern Ireland.

“Instead, it could mean that more people are moving out of inactivity and into the labour force to find jobs – the latest data suggests that about 40,000 people who are currently economically inactive would like to work – or potentially that there are more working-aged people moving into NI.

“A greater number of people starting to look for work should make it easier for businesses to hire the people they need across all levels of qualifications, improve the long-term capacity of the economy and therefore also boost the confidence levels of people who live here.”

Category: General

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