Era of slower job growth ahead

Singapore

THE numbers are not all in, but data from January to September of 2015 is already pointing to sagging job growth that could hit a new low when the year is up.

With quarterly gains sliding year on year, the 16,200 jobs created in the first nine months were the fewest since 2009. Employment rose by just 37,600 in that recession year. The overall number for 2015 is set to be lower.

The drop in new jobs seen so far this year is unusually big for an economy that's, while softening, still not in recession - at least officially.

Something is deeply wrong, or it may just be an aberration. In any case, the question is already raised: Is low job growth here to stay? The year ahead should provide a clearer picture.

Employment gains picked up after the plunge in 2009, but not to the levels in the three years prior to the economic downturn - 176,000 in 2006, 243,900 in 2007 and 221,600 in 2008.

Jobs were up 115,900 in the year after 2009. They rose 122,600 in 2011, 129,100 in 2012 and 136,200 in 2013.

Growth eased to 130,100 last year before slowing down sharply in the first three quarters of 2015.

Many recruiting firms as well as economists in both the private and public sector see the decline extending into 2016, though not for exactly the same reasons.

Headhunters and human resource (HR) specialists have predicted that hiring could be halted completely in the second half of 2016, as the full impact of the recent stockmarket turmoil and China's economic slowdown hit home.

"It has been decidedly more difficult to get new headcount approval and employers are also generally more cautious," ZW HR Consulting managing director Mervin Chui told The Straits Times recently.

Recruitment firm ManpowerGroup's latest quarterly poll shows that the number of employers planning to cut staff has risen, while the number intending to increase headcount fell.

"The plus 11 per cent in net employment outlook for the first quarter of 2016 is the weakest since the third quarter of 2009," its report says. "This indicates that employers may be bracing for slower growth at home and uncertain demand abroad."

Net employment outlook is the percentage difference between those wanting to hire more and those wanting to axe workers.

The hiring prospect has weakened in six of the seven sectors ManpowerGroup polled, when compared with a year ago. The services sector and the wholesale trade and retail sector are planning the biggest cutbacks.

Only the largely non-commercial public administration and education sector are more upbeat about recruiting in the year ahead.

Overall employment will still grow in 2016, but the growth will be "modest", according to recruitment firm Michael Page.

Both private-sector analysts and policymakers blame the slowdown in job expansion this year on a momentary weakness in the economy, which the analysts think will, unfortunately, linger in 2016.

But policymakers believe something fundamental and enduring is also at work - and they view the latest drop in employment gain as a likely signal that Singapore is entering a new phase of low job growth.

After all, the Ministry of Trade and Industry has projected that Singapore's economic growth would slow to an annual 2-4 per cent in the next five years.

The Monetary Authority of Singapore even calculated that because of long-term supply constraints, rooted in slower population growth and an ageing workforce, annual job growth will not exceed 50,000 from hereon.

The Ministry of Manpower couldn't agree more. It added in its Singapore Workforce 2015 report that the slower pace of job increases - slower than in the past five years - is expected to last till the end of the decade, as the residential workforce growth eases and economic restructuring continues.

According to Manpower Minister Lim Swee Say, pushed by the government's aggressive productivity drive, bosses are switching fast to adopt labour-lean business models that depend more on efficiency and innovation than on workers.

The slowdown, reflected also in cutback in hirings, has loosened the tight labour market. But overall unemployment stayed low at 2 per cent in the third quarter. Trading Economics, a consultancy firm, expects inflation to creep up to only 2.01 per cent next year.

Job openings still outnumber job seekers, though the ratio narrowed from 121 openings per 100 seekers in June to 116 openings per 100 seekers in September. Job seekers aged 40 and above are also finding it harder to secure new employment.

Will this picture change radically in 2016?

With the economy still looking tepid, caution will be the watchword among employers next year when it comes to recruiting staff. Competition for workers will remain, but it will be less stiff, so pay hikes may moderate in 2016.

Recruiters and HR specialists think that salaries could rise by around 4 per cent, a tad below the 4.5 per cent average in 2015. But inflation, ranging from negative to negligible for most of this year, is likely to go up next year.

HR consultancy Korn Ferry Hay Group sees a 0.3 per cent uptick in the consumer price index, which means the 4 per cent pay increase for 2016 will amount to just 3.7 per cent in real terms.

ECA International projects a real pay rise of only 2.2 per cent in the new year, after adjusting for a likely inflation rate of 1.8 per cent.

Towers Watson expects salaries to jump 4.4 per cent in 2016, falling to 2.9 per cent after taking into account an expected 1.5 per cent inflation rate.

For more of BT's year-in-review stories, visit bt.sg/review_15