Rise in long-term unemployment to 0.7% in September ‘bears close monitoring’: MOM

JOB vacancies in Singapore fell in September, while third-quarter retrenchments rose as a sign of cooling labour demand in the Republic, the Ministry of Manpower’s (MOM) latest labour market report showed on Thursday (Dec 14).

The rise in the resident long-term unemployment rate to 0.7 per cent in September, from the eight-year low of 0.5 per cent in June, also “bears close monitoring”, MOM said, even if it is comparable to the pre-Covid average of 0.7 per cent.

Maybank senior economist Chua Hak Bin said the rise in numbers “bears watching but is not particularly alarming”.

“The labour market is normalising to pre-pandemic norms, with revenge spending from the reopening dissipating,” he said. “Firms are adjusting their manpower needs in the face of volatile swings in demand, consumer behaviour and technology.”

He added that the government may unveil some form of unemployment financial support scheme in the upcoming Budget, which would be tied to retraining and reskilling. This, he said, could help contain the rise in structural unemployment.

The number of layoffs grew to 4,110 in Q3, a 28 per cent increase from the 3,200 in the previous quarter. This is the highest number of quarterly retrenchments since Q4 2020 during Covid-19.

In a Facebook post, assistant secretary-general Patrick Tay of the National Trades Union Congress said he is expecting full-year retrenchments to cross the 12,000 mark, especially with layoffs expected in Q4 in sectors such as electronics manufacturing.

This would be close to double last year’s figure at 6,440.

Meanwhile, the number of job vacancies went down to 78,400 in September, from 87,900 in June. About a third of job vacancies were in growth sectors such as information and communications, and health and social services.

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Nonetheless, the labour market remained tight, said MOM, with the ratio of job vacancies to unemployed persons at 1.58 in September.

On the whole, the labour market still expanded in Q3, with total employment up for the eighth straight quarter with an increase of 23,600. Both resident and non-resident employment increased.

Resident employment grew by 2,800, compared with a contraction of 1,200 in Q2. MOM said the increase was mainly in growth sectors including health and social services, financial and insurance services and professional services.

MOM said while the labour market continued to expand, the pace of employment growth has slowed compared to a year ago, with economic headwinds expected to weigh on the labour market going forward.

Unemployment rates stayed low in October, with the overall rate at 1.9 per cent, resident unemployment at 2.7 per cent and citizen unemployment at 2.9 per cent.

Economists said they expect to see labour demand cooling into 2024.

“The labour market was exceptionally tight in 2022 and 2023, and in some sense this represents a normalising of labour demand and supply to pre-pandemic levels,” said Moody’s Analytics economist Denise Cheok.

She said while Singapore’s economic prospects are “tentatively looking up”, external conditions remain “extremely fragile”, with recession risks “still uncomfortably high in the US”.

“Together with heightened geopolitical tensions, the outlook is still subjected to a significant degree of uncertainty, which could in turn flow into the labour market, causing the long-term unemployment rate to potentially pick up if additional external shocks were to occur,” she said.

Likewise, DBS economist Chua Han Teng expects Singapore’s labour demand to moderate further in the near-term but believes the external-led economic recovery in the second half of 2024 would eventually support employment growth.

Maybank’s Chua said he expects total employment to expand at about the same pace in 2024, as the economy grows. He has pencilled a 2024 full-year growth rate of 2.2 per cent, up from 1.1 per cent this year.

“Hiring should pick up in the manufacturing and trade-related services sectors, while hiring could cool in the ‘revenge’ services sectors, like hospitality, retail and food and beverage,” he said.

He added that labour productivity tends to be higher in manufacturing, compared with many labour-intensive services sectors such as healthcare, education and hospitality.

This means that stronger manufacturing growth would typically translate into fewer jobs created relative to services, given the different labour intensity.