The most recent market data released on Thursday indicates a cooling demand for labor in Singapore, suggesting a potential toughening of the job market for workers. This trend is attributed to economic uncertainty and global headwinds.
According to the Ministry of Manpower’s (MOM) labor market report for the first quarter, total employment expansion has slowed down, retrenchments have increased, and job vacancies, although still at a high level, have declined for the fourth consecutive quarter.
Retrenchments have also risen for the third consecutive quarter, reaching 3,820 compared to 2,990 in the fourth quarter of 2022.
However, despite these challenges, the labor market remains relatively tight. A significant 71.7% of retrenched Singaporeans and permanent residents (PRs) were able to secure employment within six months, and unemployment rates have remained low.
In response to this latest data, Labor Member of Parliament Patrick Tay emphasized the need to closely monitor the re-entry rate into employment for the unemployed or retrenched individuals, acknowledging that while there has been improvement, continued attention is necessary.
“Structural challenges such as skills and job mismatches continue to be one of the main causes of unemployment in Singapore in the near and medium term. As such, we need to double down our efforts and build on our momentum to promote and encourage skills upgrading and acquisition to stay ready, relevant, and resilient.”
The increase in layoffs during the first quarter of the year was primarily observed in outward-oriented sectors such as electronics manufacturing, information and communications, and financial services. These sectors experienced higher retrenchment numbers compared to the previous quarter.
Despite the rise in retrenchments, the total number of employed persons in Singapore saw a growth of 33,000 during the January to March period, marking six consecutive quarters of expansion. It is important to note that these employment figures do not include migrant domestic workers.
The increase in employed Singapore citizens and permanent residents (PRs) amounted to 2,800 individuals, mainly driven by gains in the financial services, professional services, and health and social services sectors.
The remaining employment growth of 30,200 individuals came from non-resident workers, particularly in the construction and manufacturing industries. Notably, this is the first time that non-resident employment has exceeded its pre-pandemic levels.
However, despite total employment in Singapore surpassing pre-pandemic levels by 3.8%, the rate of growth has moderated compared to the previous quarter’s increase of 43,500.
Additionally, there were indications of cooling labor demand. Job vacancies continued to decline for the fourth consecutive quarter, reaching 99,600 in March. However, the number of vacancies remained relatively high, partly due to the slower recovery of non-resident employment in sectors such as retail trade and food and beverage services.
The ratio of job vacancies to unemployed persons remained elevated at 2.28 (228 jobs to 100 persons), although it slightly decreased from 2.33 in December 2022.
Overall, the unemployment rate (1.8%) and resident long-term unemployment rate (0.6%) in March 2023 remained low. In Singapore, long-term unemployment is defined as individuals aged fifteen years and over who have been unemployed for 25 weeks or more. It is worth noting that education is recognized as a form of employment.
The jobless rates for Singapore citizens and permanent residents (PRs) remained low or showed signs of improvement across various age and education groups.
The Ministry of Manpower (MOM) stated that employment growth is expected to continue moderating due to weakening external demand and challenges in the global economy.
Selena Ling, the Chief Economist of OCBC Bank, mentioned to The Straits Times that the softening labor market outlook is not surprising considering the deteriorating external environment. Factors contributing to this include regional banking issues in the United States, China’s slow recovery, and the ongoing global semiconductor slump.
She said: “Recent business sentiments have also softened, as reflected in the manufacturing and electronics Purchasing Managers’ Index (PMI) as well as our OCBC SME index. Hiring intentions and employment growth have begun to soften and may moderate in coming months, since growth momentum is likely to slow in the second half of 2023.
“Interestingly, the rising vacancy and retrenchments for some industries like information and communication technologies and financial services suggest some ongoing churn and/or pockets of opportunities within the sector.”
DBS economist Chua Han Teng said that economic uncertainty looks likely to soften labour demand even further.
“Even though the resident rate of re-entry into employment (6 months post-retrenchment) remained high and above the pre-pandemic average despite higher retrenchments, the re-entry rate could continue to inch lower as labour demand cools amid an uncertain economic environment,” he said.
RHB senior economist Barnabas Gan said some short-term weakness in Singapore’s labour market would not be a surprise given the risk of a technical recession, but this was likely to be temporary.
He added: “The total unemployment rate of 1.8 percent is certainly something to boast about – Singapore is basically at full employment. The unemployment numbers are at a multi-year low, and suggests that our labour market remains strong and resilient despite economic conditions.”
Mr. Gan said that the uptick in non-resident employment numbers could also be a positive indicator.
He pointed out that this is the first time the numbers have surpassed pre-pandemic employment numbers, which could signal that companies are hiring more foreign labor in industries such as services.
It coincides with the uptick in tourism numbers, suggesting growth to be seen in sectors such as the services industry, said Mr. Gan.
