SINGAPORE - Wage growth in Singapore is expected to ease in this year and the next, with hiring sentiment turning cautious and fewer job vacancies than unemployed persons, said the Monetary Authority of Singapore (MAS).
The trade-related cluster is likely to continue trimming headcount as well, particularly in the electronics and precision engineering industries within manufacturing, as well as in wholesale trade, the central bank added in its biannual macroeconomic review on Wednesday (Oct 30).
This comes amid weakness in the global electronics cycle and persistent trade frictions, with vacancy rates in these sectors falling.
The decline in headcount in the first half of 2019 has also been concentrated in electronics manufacturing and wholesale trade, said MAS.
OCBC Bank’s head of treasury research and strategy Selena Ling told The Straits Times that the softening in the labour market is both cyclical and structural, with some of it due to business restructuring and digital transformation.
While unemployment rates are edging up, she added that it would be more concerning if retrenchment spiked or widened to non-manufacturing sectors.
“Wage growth moderation is to be expected, given the overall sluggish growth environment,” she said, adding that if Singapore will have issues with labour competitiveness otherwise.
While hiring in modern services and domestic-oriented clusters more than offset job losses in the trade-related cluster in the first six months, hiring sentiment has been more restrained, said the MAS.
There were fewer job vacancies than unemployed persons for the first time since December 2017 as well, and the re-entry rate among retrenched residents has declined.
But even as hiring sentiment turned cautious, employers have retained existing workers, tending to place them on a short work-week or temporarily lay them off to reduce labour costs, said MAS.
"The slowdown in gross domestic product growth has mainly been absorbed by weaker productivity growth rather than cuts to employment," MAS added
Growth of companies' gross operating surplus has dropped to around zero in the first half of the year while that of employees' compensation remained relatively stable at 3.5 per cent.
The economic slowdown is expected to dampen hiring unevenly across industries, with the trade-related cluster likely to continue trimming headcount.
Job creation in the modern services cluster should remain relatively firm, provided business sentiment does not deteriorate significantly, while hiring in the domestic-oriented cluster will be supported by construction activities.
Wage growth is likely to ease, however, with MAS saying: "Declining profitability as well as the softening labour market should reduce the pace of wage growth, especially in firms with more flexible compensation arrangements."
The central bank said as well that external and domestic cost pressures are not likely to rise further, and the pass-through to consumer prices should be limited.