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SINGAPORE: Singapore’s labor market is likely to bottom out later this year, but the recovery will be uneven, economists said.
According to figures released on Friday (October 30), the country’s unemployment rate rose to 3.6 percent in September from 3.4 percent in August.
The number of layoffs this year amounted to 20,450 so far. Total employment fell by another 26,900 in the third quarter after a record drop of 103,800 in the previous quarter.
While the overall unemployment rate increased, it increased at a slower pace. rate compared to previous months, and local employment grew by around 50,000.
READ: Singapore’s Unemployment Rate Rises to 3.6%; more than 20,000 layoffs to date
Meanwhile, advance estimates of gross domestic product (GDP) released in early October showed the economy contracting at a slower pace of 7% in the third quarter compared to the same period last year, compared to the contraction. of 13.3% in the second quarter.
On a seasonally adjusted quarter-over-quarter basis, Singapore’s economy expanded 7.9% in the third quarter, recovering from the 13.2% contraction in the previous quarter.
READ: Singapore’s third-quarter GDP contracts at a slower pace of 7% after the economy gradually reopens after the circuit breaker
These figures show that the unemployment rate is close to peaking, likely in the fourth quarter, said DBS senior economist Irvin Seah.
Labor figures are typically behind the growth cycle by one to two quarters, he said.
Although unemployment has risen, he added that “the rate of deterioration in the labor market is moderating,” especially as policy measures to create jobs and prevent job losses have gathered momentum. Job losses in the coming months will be less than in the previous two quarters, Seah said.
However, job market growth may not come so soon, economists warned. They expect the job market to stabilize, but it will remain sluggish after it bottoms out.
“Until … something like the vaccine can make a difference is widely available (then) some of these labor-intensive sectors will have a little more confidence in hiring workers again,” said Bank of America economist Faiz. Nagutha.
“Employers will continue to be cautious in their hiring; they will only start increasing their workforce when they see a more pronounced improvement in the profits of their businesses,” added Seah, who believes conditions will stabilize until the middle of next year.
The Monetary Authority of Singapore also warned on Wednesday that the recovery in the labor market would drag on and that there would be a greater strain on labor demand in 2021.
READ: COVID-19 slowdown will be longer than past recessions, slow job market recovery: MORE
UNEQUAL RECOVERY
Analysts expect the labor market to recover unevenly, or what is known as a “K-shaped” recovery. Sectors that have been resilient will continue to hire, while the rest will shed their workforce.
For example, industries such as technology, pharmaceuticals, financial services, and electronics have outpaced the economy, largely due to demand for work-from-home tools and services, as well as active pharmaceutical ingredients.
A DBS report released Wednesday projected that while GDP growth for this year is expected to be -6%, performance across all sectors is considerably disparate, from -34% in the hotel and restaurant sector to 7.5% in financial services. .
A graph from a DBS report from October 28 that projects that the growth of the economy will differ greatly between sectors.
The employment data also highlighted the disparate nature of the economic impact.
Jobs were lost in almost all industries in the second quarter of this year, but employment contracted much less in sectors that remained stable, and even increased in insurance and electronics manufacturing.
Second-quarter data from the Ministry of Manpower showed that sectors that performed relatively well lost fewer jobs than those that were severely affected by COVID-19.
Unfortunately, the industries that are doing the best right now are the least labor-intensive and may not be able to absorb as many workers who lost their jobs, said Mr. Nagutha.
On the other hand, industries that have been severely affected mostly hire lower-paid front-line workers, said Seah, calling the pandemic a “highly regressive event.”
He referred to a separate report he and his colleagues released in August that looked at the revenue earned by 1.2 million DBS retail customers. They found that 26 percent of Singaporeans and permanent residents between the ages of 25 and 70 saw their income drop by at least 10 percent in May.
Those earning S $ 2,999 or less made up 49 percent, the largest percentage, of customers whose income fell by at least 10 percent. Among this group, about one in two saw their income decrease by more than half.
Looking at the sector, the bank found that 81%, 76% and 50% of customers in the aviation, hospitality and food services sectors, respectively, saw their revenues cut in May compared to the 24 average. % of clients from other sectors. .
A K-shaped recovery could cause the income gap to widen and cripple the gains made by low-wage workers in the past five years, Nagutha said.
He noted that between 2014 and 2019, the wages of residents in the bottom 20th percentile in Singapore grew at a faster rate of 4.4 percent than those earning a median wage, which grew to 3.8 percent.
READ: Revenue growth slows in Singapore; Median Salary Now Above S $ 4,500: MOM Report
“This process could stall or even be reversed,” Nagutha said.
Even if the demand for dining out or shopping returns to substantial levels, many workers may not get back to their old jobs.
For one thing, there have been limits on capacity, he said, citing safe distancing measures at food outlets.
“So, at best, restaurants are actually 60 percent of what they used to do, 70 percent of what they used to do. So you still have 30 percent, ”he said.
“Maybe he stayed with the workers because of the employment support that the Government gave, and that is going to end. Do you redo your math and say ‘okay, maybe I still need the 30 percent excess that I kept’? You may continue to get rid of that even if you are attracting more people. “
Companies may also be reluctant to hire out of fear of a new round of restrictions if there is another spike in COVID-19 cases.
Since the pandemic has accelerated the use of technology, these labor-intensive companies may have adopted digital tools and services that may replace some workers.
But observers said authorities have taken note of gaps in the job market. One of the top priorities of the S $ 100 billion COVID-19 stimulus package has been saving jobs and introducing new ones.
So far, more than S $ 21 billion has been awarded under the Employment Support Program, a 17-month wage subsidy program to help companies stay afloat and encourage them to keep their employees.
Another wage subsidy scheme, the Job Growth Incentive, which aims to encourage companies to hire more locals, started in September.
Without these brochures, the number of layoffs could have skyrocketed much higher than it is today, analysts said.
There is also the SGUnited Jobs and Skills Package which aims to create more than 100,000 jobs and training positions, especially for those who have been laid off.
READ: More than 2,100 opportunities available in the logistics sector under the SGUnited program
“If we look at the types of opportunities available, especially when skills don’t match those that are in line with changing trends … the government is trying to address this (skills gap) with various training opportunities,” said the strategist. HL Bank Treasury Senior Said Jeff Ng.
Singapore also has the competitive advantage to take advantage of global economic trends, he added, pointing to the development of 5G technology, as well as the country’s position in the growing Asia-Pacific region, particularly China, which saw its GDP grow by a 4.9 percent in the third quarter, while most other economies contracted.
READ: China’s economic recovery accelerates in Q3 as consumption returns
However, he said the challenge remains whether workers here have the right skills to cope with the changes that are rapidly coming.
“I think during normal times, there could be a slow transition from the lower value-added economy to a higher value-added one, and there is definitely a lot of time for workers to train slowly and adapt to these changing conditions,” said Mr. Ng said.
“But right now … the rate of change (is) at least five to ten times higher.”
Mr. Nagutha said that the Government could, in the meantime, distribute more financial aid to the unemployed so that there is a better work mix.
“We certainly don’t want to encourage people to stop looking for work and remain unemployed, but we also want to make sure that people don’t feel rushed into whatever comes along,” he said.
“If you wait another month and can get a better job, a better fit, you should wait another month,” he added, suggesting that such a policy could have a time limit to prevent abuse.
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