Singapore retrenchments hit 4,100 in Q3, highest since Q4 2020

THE number of retrenchments in Singapore climbed in the third quarter, even as the labour market expanded for eight consecutive quarters, early data from the Ministry of Manpower (MOM) showed on Thursday (Oct 26).

At the same time, the ministry also warned of a “slow uptrend” in unemployment rates, even if they remained low due to “continued labour market tightness”.

There were 4,100 layoffs in Q3, up from 3,200 in the previous quarter, MOM’s labour market advance release report indicated.

This is the highest number of quarterly retrenchments since Q4 2020 during Covid-19. This brings year-to-date retrenchment figures to 11,120 – a near doubling of the 6,440 recorded in the whole of last year.

The ministry said the majority of the increase in Q3 came from wholesale trade, reflecting the sector’s weaker external outlook. Business restructuring remained the top reason for retrenchments in the quarter, and the number in other sectors “remained broadly stable or declined”, it added.

Patrick Tay, assistant secretary-general of the National Trades Union Congress (NTUC), said in a Facebook post that total retrenchment numbers to date crossed the 10,000 mark due to cyclical factors such as a weakening in demand across the globe.

“I expect we may end the year 2023 with overall layoff numbers higher than pre-Covid in 2018 and 2019,” Tay added.

Still, total employment – excluding migrant domestic workers – grew by 24,000 in Q3, almost on a par with Q2’s 24,300. The growth came from both residents and non-residents, MOM said, although it did not provide a breakdown.

It noted that resident employment expanded in growth sectors such as financial services and professional services, which generally had higher paying jobs, as well as health and social services.

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Non-resident employment grew in sectors such as construction, retail trade, food and beverage (F&B) services as well as administrative support services, it said.

Unemployment rates in September remained largely unchanged from the previous month, following a slight uptick in July.

Overall unemployment stayed at 2 per cent while resident unemployment was at 2.8 per cent.

Only citizen unemployment inched up marginally to 3 per cent, up from 2.9 per cent in August.

Noting that unemployment rates remained low despite the rise in retrenchments and unemployment, MOM said: “This suggests that most retrenched workers have been able to find new employment quickly.”

It added however that the pace of employment growth has slowed compared to a year ago, amid the global economic slowdown.

Last month, business expectations appeared to worsen – the proportion of firms indicating an intention to hire in the next three months dropped to 42.8 per cent, compared with 58.2 per cent earlier, MOM said.

Likewise, those that intend to raise wages during the same period fell to 18 per cent, down from 28 per cent.

“While unemployment rates remained low due to continued labour market tightness, they have been on a slow uptrend, and may continue to rise further,” MOM said.

OCBC chief economist Selena Ling said that the total employment growth alongside higher retrenchment suggests that while there is increasing caution over the external demand and economic outlook, there are still pockets of growth in areas such as financial services and professional services, as well as health and social services which are hiring.

She added that businesses’ “slightly more cautious manpower outlook” is warranted given the recent escalation in geopolitical tensions, especially with the conflict in the Middle East.

“It would not surprise me if employment growth continues to gradually ease, while retrenchments remain concentrated in specific industries like wholesale trade, which is reflecting the weakness in global demand conditions including China,” she said.

UOB senior economist Alvin Liew said he is expecting overall unemployment rate to edge higher to 2.1 per cent with “measured pickup” in retrenchments into the final quarter of 2023.

“That said, at 2.1 per cent headline unemployment rate, it still reflects a relatively tight labour market in Singapore,” he said.

He expects retrenchments to pick up in sectors that are dependent on external demand and manufacturing activity, but added that hiring opportunities remain within the services sectors, especially in the accommodation, transport and F&B services sectors.

Striking a more optimistic note, Maybank senior economist Chua Hak Bin said employment growth of about 24,000 is “an encouraging sign” given weak gross domestic product growth of just 0.7 per cent in Q3.

“Labour demand might be holding up in anticipation of an economic recovery going into 2024,” he said.

The full report of the labour market’s performance in Q3 will be released in mid-December.