Singapore's labour market on the upswing as it gradually reopens borders: economists

SINGAPORE'S labour market is likely to see an upswing going into the final quarter of 2021, especially as the country gradually peels back border restrictions, economists said.

The signs seem promising so far, with the Republic's Q3 employment indicators showing an improvement across the board, compared with the previous quarter, according to advance data from the Ministry of Manpower (MOM) on Friday (Oct 29).

Total employment fell by 3,400, a lesser degree than the 16,300 shed in Q2. Non-resident workers made up the decline, said MOM, whereas resident employment grew more quickly in Q3 than in the earlier quarter. A full breakdown is expected in the final report due in December.

Retrenchments dipped slightly from 2,340 to 2,000 in Q3, with 75 per cent of these in services. There were 9,120 layoffs at the peak of the Covid-19 pandemic in Q3 last year.

Compared with August, unemployment figures fell 0.1 percentage point in all categories in September, with the overall unemployment rate at 2.6 per cent, resident unemployment at 3.5 per cent and citizen unemployment at 3.7 per cent.

This is the second straight month unemployment rates eased, following a brief uptick in July that economists now attribute to tightened measures during Phase 2 (Heightened Alert), or P2HA.

"The July data probably reflected a knee-jerk reaction to the return to P2HA; but from the August to September period onwards, businesses that are more externally-oriented likely saw their confidence improve with the ongoing global economic and demand recovery - benefiting the information and communications, financial and professional services," said OCBC chief economist Selena Ling.

Sung-Eun Jung, an economist at Oxford Economics, said it is important to understand the falling unemployment rate in the context of the shrinking labour force.

"Employment is yet to pick up markedly but the weak labour force is essentially supporting an improving unemployment rate. Now, resident employment has definitely fared better and is improving, but the size of the foreign worker outflows are still dominating the overall figures," she said.

Nonetheless, the gains come despite stricter Covid-19 measures, including dine-in curbs, as Singapore faces its worst outbreak yet.

Aubeck Kam, manpower permanent secretary, told reporters this is because recovery is underpinned by strong growth in economic activity and in the external-oriented sectors.

"We see employment growth happening in sectors which are also seeing economic growth, so in other words, labour is moving to where they can make the best contribution," he said.

There has not been "across-the-board" growth because services that depend on people gathering have had to be more constrained, but this was offset by growth in demand for other services, such as community and social services," he added.

UOB economist Barnabas Gan said Singapore's current measures have been less restrictive than that during the "circuit breaker" or partial lockdown in Q2 last year, adding: "The current 'stabilisation phase' has done little to stall Singapore's key economic drivers such as manufacturing and exports."

Meanwhile, Singapore's plans to reopen its borders to South Asian countries - where the vast majority of its migrant workers are from - bode well for the labour market and could provide a much-needed boost for sectors like construction, said Maybank Kim Eng economist Lee Ju Ye.

Early this week, the Republic also announced two new vaccinated travel lanes (VTL) to Australia and Switzerland, adding to an existing 11 countries whose vaccinated travellers can enter Singapore without quarantine.

The VTLs, together with travel-related activities may give an uplift to industries such as air transport services, Manpower Minister Tan See Leng told reporters following a visit to Deloitte Consulting.

However, economists were a little more tentative about the potential impact of the VTLs, especially with a daily quota of 4,000 arrivals.

Jamus Lim, an economist at ESSEC Business School Asia Pacific said any recovery is likely to be "more gradual and uphill, rather than a huge boost".

"There will certainly be an improvement but we must keep in mind that travel depends not only on us making it easier for others to come, but also the attractiveness of coming here relative to other locations, and the fact that VTLs only cover a fraction of countries we previously had direct links to," he said.

Jung added that most incoming VTL travellers are likely to be returning employment pass holders or relatives of residents here. Tourist numbers could remain low given the relatively restrict Covid-19 rules, she said.

On the whole, economists are also expecting fewer layoffs ahead.

This is due to the high job vacancy to job seeker ratio, which hit a record-high of 1.63 in Q2, Jung said.

Lee noted that retrenchments have fallen below pre-pandemic levels, since there were 2,470 in Q3 2019.

However, with fiscal support and job subsidies set to fade in 2022, she said firms in consumer-facing sectors could shed workers if strict Covid-19 measures persist into the new year.

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