SINGAPORE - Retrenchments in Singapore more than doubled in 2023 from the previous year to 14,320, even as the overall unemployment rate fell slightly.

Total employment growth here for the full year of 2023 slowed amid weaker economic conditions, following a sharp post-pandemic rebound in 2022.

According to preliminary estimates released by the Ministry of Manpower (MOM) on Jan 31, the more muted pace of growth was seen for both residents and non-residents.

On a quarterly basis, while the increase in total employment, excluding migrant domestic workers, moderated significantly, it continued to grow for the ninth consecutive quarter, expanding by 8,400 in the last quarter of 2023.

The ministry said: “This moderation was not unexpected as weaker hiring expectations and declining job vacancies from previous quarters indicated cooling labour demand.”

Business reorganisation or restructuring remained the top reason for retrenchments in 2023, due in part to the impact of global economic headwinds on outward-oriented sectors such as wholesale trade, information technology services and electronics manufacturing.

However, on a quarterly basis, the number of retrenchments in the fourth quarter of 2023 fell to 3,200 compared with 4,110 in the third quarter, which was marked by a surge in wholesale trade retrenchments.

MOM added: “While retrenchments rose in electronics manufacturing, the number of retrenchments in other sectors remained broadly stable or declined.”

On the external headwinds, DBS Bank economist Chua Han Teng noted: “Singapore’s full-year 2023 manufacturing output dropped by 4.3 per cent, registering the weakest annual performance since 2015, due to the global electronics downturn.”

Mr Patrick Tay, assistant secretary-general of the National Trades Union Congress, said: “In 2024, persistent structural and cyclical forces, sectoral restructuring, global challenges and ongoing uncertainty will contribute to unemployment, with continued volatility and disruption affecting retrenchment numbers.

“I am particularly concerned for the electronics manufacturing sector, as cyclical and global demand forces continue to dampen optimism for the industry.”

Ms Selena Ling, OCBC Bank’s chief economist, said that while there has been some uptick in retrenchment numbers, the outlook for Singapore’s market remains positive.

She said: “One year ago, people were very worried about inflation and recession. Today, they are actually more worried about geopolitical uncertainties... But beyond that, the hope is that it will generally be a soft landing for the global economy.”

Citing the technology industry as an example, Ms Ling said: “The destocking cycle is kind of over, right? If anything, things should be picking up a little bit from here. So it’s probably that the last few years they’ve been on this big hiring binge because of the pandemic.

“Now, a bit of indigestion is coming through, so they’re starting to lay off some people.”

For the full year of 2023, the overall unemployment rate dipped slightly to 1.9 per cent, from 2.1 per cent in 2022.

The rate for Singaporeans was 2.9 per cent in 2023, down from 3 per cent, while the rate for Singaporeans and permanent residents combined was 2.7 per cent, down from 2.9 per cent.

On a monthly, seasonally adjusted basis, the unemployment rates in December 2023 were the same as those in November. The overall rate was 2 per cent.

Ms Ling said a majority of those retrenched have managed to re-enter employment in other industries.

“It’s not like a cyclical downturn where everything is going down and businesses have to drastically cut staff. It is more business-driven... there are not fewer jobs, but a transfer of labour in a fairly tight market,” she added.

The ministry said its surveys indicate an improvement in business expectations, with the Ministry of Trade and Industry also indicating expectations of improved economic growth prospects in 2024.

MOM said the proportion of companies that indicated an intention to hire in the next three months rose from 42.8 per cent in the third quarter of 2023 to 47.7 per cent in the October to December period.

Likewise, the proportion of companies with an intention to raise wages rose from 18 per cent to 32.6 per cent over the corresponding periods.

Ms Ling said the stabilisation and small uptick in hiring plans and plans to raise wages suggest that firms are still quite forward-looking, adding that employers will still be looking to attract talent in 2025. To do so in a generally tight market, they will need to offer competitive wages.

Associate Professor (Practice) Terence Ho from the Lee Kuan Yew School of Public Policy at the National University of Singapore said: “The pace of economic growth is expected to pick up in 2024, and this should translate to increased demand for workers and give a lift to wages.

“We can be cautiously optimistic that the labour market will remain fairly tight, given the positive economic signs in the fourth quarter of 2023 and the improved economic outlook for this year.”

He added that there should be continued expansion of employment in domestic sectors such as healthcare and social services as the population ages and social needs grow.

“Growth prospects of the manufacturing and trade-related sectors are expected to improve in 2024, although it remains to be seen how much of a boost this will give to employment,” he said.

While employment prospects might be looking up, MOM also cautions that as downside risks in the global economy remain, business reorganisation or restructuring will continue and may lead to further retrenchments.

DBS’ Mr Chua said: “We expect Singapore’s labour market to remain soft and be less tight at least in the first half of 2024, amid still uncertain economic conditions and cool labour demand.

“Singapore’s external-led growth recovery in 2024 is likely to be gradual and fragile, in our view. While we saw an uptick in the proportion of firms with an intention to hire in the next three months in the fourth quarter of 2023, this remained lower than in the first half of 2023, somewhat reflecting still-cautious business sentiment.” 

The ministry said: “The Government strongly encourages employers and workers to make full use of available programmes to remain competitive and resilient amid economic uncertainty.

“Employers should press on with business transformation and equip their workers for expanded or redesigned job roles. Workers are encouraged to continue to upskill and be open to new opportunities.”