Economists see uneven employment growth in Singapore in 2023

SINGAPORE’S employment growth is expected to become more uneven in 2023, after expanding at a record level last year on the back of a rebound in the hiring of foreign workers.

Total employment grew by an unprecedented 231,700 in 2022, according to a preliminary report from the Ministry of Manpower (MOM) on Tuesday (Jan 31). The increase was driven mainly by a growth in non-resident employment in the construction and manufacturing sectors, which are typically more reliant on foreign manpower.

Resident employment also grew in 2022, but at a slower pace than the year before. Growth was observed across most sectors, and particularly in outward-facing sectors such as financial services; information and communications; and community, social and personal services.

In 2023, employment growth will likely moderate to a more “sustainable magnitude” of around 100,000, said Maybank economist Chua Hak Bin. Growth is likely to be more uneven as well, with hiring activity expected to be more lacklustre in outward-oriented sectors such as manufacturing, finance and tech.

While the manufacturing sector appears more downcast, there are still “pockets of growth segments which will be hiring and giving wage growth”, said OCBC chief economist Selena Ling.

Industries that are looking more upbeat include accommodation, and transport and storage, which are gearing up for the highly anticipated return of Chinese visitors, said Ling. The professional services industry, including engineering design and consultancy, are also seeing more demand for their services.

In contrast, some domestic-oriented services industries – such as food and beverage services – have turned slightly more cautious in their outlook, Ling noted. This is possibly due to the persistently high inflation, foreign manpower shortage and the expectation that consumers may cut back on discretionary spending due to the growing macroeconomic headwinds.

Giving its outlook for 2023, MOM said hiring sentiments are expected to remain positive in the coming months. Nevertheless, the labour market could face headwinds in the coming quarters, as the slowdown in growth is likely to have “some impact on the momentum of labour market improvement”.

There is also a possibility of layoffs and unemployment rates “creeping up” in the first two quarters due to ongoing uncertainties and softening global demand affecting sectors like manufacturing, said National Trades Union Congress assistant secretary-general Patrick Tay in a Facebook post.

Unemployment rates returned to its “pre-pandemic steady state” in 2022, with annual average unemployment rates significantly lower than compared to a year ago, said MOM in its report.

Overall unemployment last year was at 2.1 per cent, compared to 2.7 per cent in 2021.

Resident unemployment in 2022 was at 2.9 per cent, down from 3.5 per cent the previous year, and citizen unemployment was at 3 per cent last year compared to 3.7 per cent in 2021.

Even so, RHB senior economist Barnabas Gan expects the unemployment rate to nudge up to just 2.4 per cent in the first half of this year, before returning to 2 per cent by the end of 2023. This would still be much lower than the 3.4 per cent rate seen in the third quarter of 2020 during the Covid-19 pandemic, he noted.

“Today’s data does not spell any recessionary cues, but rather underline the continued tightness seen in Singapore’s labour market,” said Gan.

Indeed, job vacancy rates remained high across sectors as at the third quarter of 2022, noted Standard Chartered regional head of research for Asean and South Asia Edward Lee. While this is expected to ease in the quarters ahead, Lee expects to see only “some softening” of Singapore’s labour market as he anticipates that the economic growth slowdown may only be moderate.

For the fourth quarter last year, advance estimates showed that employment levels expanded for the fifth straight quarter. Total employment, excluding migrant domestic workers, was up by 47,400. The ministry said that total employment had surpassed its pre-pandemic level by 3 per cent in December.

Non-resident employment contributed the most to the increase, with growth concentrated in the construction sector. However, it has “moderated considerably from the highs of the last two quarters as the non-resident employment level approaches that of December 2019”, said MOM.

Supported by seasonal hiring during the year-end holiday season, resident employment growth picked up over the quarter, driven by the consumer-facing sectors of food and beverage, and retail trade.

Resident employment also rose in the community, social and support services, and financial services sectors. Growth was otherwise muted in most other sectors, said MOM.

Unemployment rates remained low in December at below pre-pandemic levels. Overall unemployment was at 2 per cent, resident unemployment at 2.8 per cent and citizen unemployment at 3 per cent.

Though the number of retrenchments went up from previous quarters’ lows at 3,000 in Q4, it was still comparable to the pre-pandemic range, said MOM.

The increase in retrenchments in Q4 was largely due to business reorganisation or restructuring, and was mainly in the information and communications, and electronics manufacturing and wholesale trade sectors. Retrenchments in other sectors remained stable.