HONG KONG - HONG Kong's unemployment rate probably rose to 3.6 per cent in August-October, its highest level in nearly a year, as an economic downturn prompted companies to trim staff costs.
The jobless rate, calculated on a three-month seasonally adjusted average, is still quite low for a developed economy. It stood at 3.4 per cent in July-September but economists see it topping 4 per cent within a few months as Hong Kong is now in recession and, as a trading and financial hub, is being hit by the global economic downturn.
The government reported on Friday that Hong Kong tipped into recession in the third quarter - commonly defined as two consecutive quarters of negative growth - making it the second Asian economy to do so after trading rival Singapore. On Monday, Japan's government announced that the country had slipped into recession for the first time in seven years.
Companies and consumers are having to adjust to a sharp reversal in the economic climate after a four-year boom which saw economic growth average 7.3 per cent annually, one of Asia's best performers.
The unemployment rate fell to 3.2 per cent in May-July this year, its lowest in more than a decade, after tumbling from a record 8.5 per cent when Hong Kong was last in recession in the spring of 2003 after the Sars virus shattered confidence.
Now companies are again putting hiring on hold or beginning to cut jobs.
Investment banks are laying off staff as part of global cuts, although the number of redundancies are still small compared with in New York or London.
Li & Fung, a global supply chain manager, which sources everything from toys to beauty products and counts US retailer Wal-Mart among its clients, said this month it had imposed a hiring freeze and would lay off some employees to save costs amid worsening economic conditions.
Meanwhile, in the neighbouring gambling haven of Macau a construction boom - propelled by liberalisation of the gambling industry a few years ago - has peaked as some casino projects have run into problems amid the global credit crisis.
Macau has attracted many low-skilled workers from Hong Kong, helping keep the jobless rate down. But last week US casino company Las Vegas Sands said it has put on hold construction on its expansion in Macau and was laying off most of the 11,000 construction staff it employs there.
To create jobs at home, Hong Kong's government is due to launch big infrastructure projects next year. It is aiming to create work for the low-skilled in particular to try and relieve structural unemployment as most jobs in manufacturing have shifted across the border to China in the past few decades. -- REUTERS
