A study of the labour market has shown the workforce grew by 95,000 this year, the biggest ever increase.
Immigration and increased participation of women led to the increase.
However, in its fourth review of the labour market, the employment and training authority FÁS says employment growth is expected to slow down next year.
While 40,000 new jobs are expected in 2006 the study shows a possible rise in unemployment could be expected in the medium term unless competitiveness improves.
The agency also warns against an over reliance on immigration to support the economy in the short term, which it says could hide weaknesses in the skills of the domestic workforce in the long term.
According to the study a slowdown in jobs growth could reduce immigration but this could take some time to take effect.
The review also found that labour shortages are already apparent in some sectors including engineering, IT, finance and some areas of the health service.
It also recommends the introduction of a wage insurance to assist those made redundant due to globalisation.
Launching the report, the Minister for Enterprise, Trade and Employment, Micheál Martin, said while such a scheme could be examined, the Government's focus would remain on up-skilling the workforce.
