Ireland’s labour market is becoming increasingly divided, with jobs growth concentrated in construction, industry and transport while employment falls across parts of the services sector, according to the Q2 2026 Irish Labour Market Monitor from the Employment and Recruitment Federation of Ireland (ERF).
CSO figures cited in the report show employment in construction, industry and transport increased by 56,500 in the year to Q1 2026. Over the same period, high-tech services lost 35,000 jobs, while labour-intensive services lost a further 36,000.
Overall employment remained broadly unchanged at 2.79 million, while the labour force grew by just 0.6%, the smallest annual increase in five years.
The ERF research, carried out by Ipsos B&A among recruitment businesses, suggests employers are increasingly using contract roles rather than committing to permanent hires.
In June, 52% of recruiters reported filling contract vacancies, compared with 41% in April. The proportion reporting an increase in contract placements during the previous month also doubled over the quarter, from 16% to 32%.
Temporary agency work, meanwhile, declined. Some 101,900 people were engaged in temporary agency work in Q1 2026, down 9,400 on the final quarter of 2025.
Siobhán Kinsella, President of the ERF, said employers had not stopped hiring but were becoming more cautious about how they recruited, particularly where the economic outlook remained uncertain.
Cost of employing workers continues to rise
The report also highlights rising labour costs as a significant pressure for businesses, particularly SMEs and labour-intensive sectors.
CSO figures show average hourly total labour costs increased by 17.4% in the three years to Q1 2026, rising from €33.15 to €38.92 per hour.
Further increases are due later this year, with PRSI rates set to rise again for employers and employees from October 1st.
That follows an increase in the national minimum wage to €14.15 per hour in January and the introduction of employer contributions under the My Future Fund automatic enrolment pension scheme.
The ERF said the cumulative increase in employment costs is increasingly influencing hiring decisions among smaller businesses ahead of Budget 2027.
Despite softer demand in parts of the labour market, recruitment agencies are also reporting that some permanent positions are taking longer to fill.
In June, 58% of recruiters said the time required to fill permanent roles had increased compared with three months earlier, while 40% said it had remained unchanged.
For contract roles, 55% said hiring times were unchanged and 40% reported an increase.
Client demand remained relatively resilient, with up to 76% of recruiters reporting that they had signed new clients during the previous month.
The seasonally adjusted unemployment rate stood at 5.0% in June, up slightly from 4.9% in May.
Despite the increase, unemployment has remained at or below 5% for 54 consecutive months.
The Central Bank has revised its forecast for employment growth in 2026 down to 1.2%, with growth of 2% projected for 2027.
Recruiter sentiment improved towards the end of the quarter, with 41% reporting a more positive outlook for vacancies over the following three months in June, compared with 35% in May.
