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UPDATE 2-Irish unemployment drops sharply as bailout exit nears

Conor Humphries
Tuesday, 26 Nov 2013 | 9:12 AM ET

* Unemployment rate falls to 12.8 percent from 13.6

* Sharpest drop since jobless numbers peaked in 2012

* Trader says 'stunning' fall bodes well for 2014 growth

DUBLIN, Nov 26 (Reuters) - Irish unemployment shrank at its fastest pace in four years in the third quarter, falling below 13 percent for the first time since a property bust and boosting the government just as it completes its EU-IMF bailout.

The seasonally adjusted unemployment rate, widely seen as one of the most important measures of the economy, fell to 12.8 percent from a revised 13.6 percent in the second quarter, the Central Statistics Office said on Tuesday.

That was the sharpest quarterly drop since unemployment peaked at 15.1 percent early last year.

A poll of economists last month had forecast it would take a further five quarters - to the end of 2014 - for the rate to fall that far.

"It's fair to say these are stunning numbers that suggest the economy is starting to enter a higher gear," said Owen Callan, a Dublin-based bond dealer at Danske Bank. "It bodes very well for 2014."

Unemployment is seen as a crucial indicator of the real health of the Irish economy because it is less susceptible to the volatile investment flows of the huge multinational sector than headline gross domestic product growth.

The Irish rate is now just marginally above the euro zone average of 12.2 percent.

The government needs to engineer a recovery in the domestic economy to meet its debt reduction targets if it wants to maintain affordable borrowing rates after it emerges from its bailout deal with the European Union and International Monetary Fund in mid-December.

It had forecast growth of 0.2 percent this year and 2 percent next year, but those numbers are based on the expectation that it would take until the end of this year for unemployment to fall to 13.5 percent.

STRONG SIGNAL TO MARKETS

"This sends a very strong signal to the bond markets," social protection minister Joan Burton, who is responsible for employment schemes, told state broadcaster RTE.

Economists said the employment sub-indexes showed the pace of growth of full time jobs hitting 3.8 percent, well ahead of part-time job growth of 1 percent.

Long-term unemployment rate fell to 7.6 percent from 8.9 percent over the year to the third quarter. While economists have cautioned in recent quarters that such falls were in part due to high emigration, the number of people in employment grew by 3.2 percent from a year earlier.

"These numbers indicate the economy is stronger than the headline growth numbers have indicated," said Alan McQuaid, chief economist at Merrion Stockbrokers.