The trade union-backed Nevin Economic Research Institute (NERI) is predicting slower employment growth over the next two years. Its latest Quarterly Economic Observer  predicts employment will increase by 1.1% in 2014 and 1.2% in 2015, compared to 2.3% this year.

It says unemployment will fall to 10.4% – more than double the pre-crisis level – by 2016, while long term unemployment will remain a “core problem” for the economy.

The report also foresees slow economic growth next year, followed by higher rates in 2015 and 2016. It predicts 1.1% growth in gross domestic product (GDP) next year, after even lower growth of 0.5% in 2013.

Its 2014 growth forecast is lower than those of the Department of Finance (2%) and the Economic and Social Research Institute (2.6%). But it foresees a return to higher growth levels in 2015 (1.8%) and 2016 (3%).

NERI says trends in employment indicate a permanent reshaping of the labour market. It says employment growth is most likely in higher-paid sectors, while the number of middle-paying occupations is likely to decline or stagnate.

It says over a fifth of Irish jobs are low-paid according to the EU definition. The number of jobs in this sector will “be dependent upon the trickle down from higher paid employment,” it says.

Improvements in the labour market will have a positive impact on exchequer finances. NERI forecasts that the current account deficit will fall from 6.8% to 4.8% of GDP in 2014. However, it anticipates that the Government will overshoot its 3% troika deficit target by 0.1% in 2015.

NERI describes its predictions as “positive but cautious.” It says potential threats to economic recovery include a weakening export outlook, high long-term unemployment, and overhang of personal debt.