Retrenchments hit their lowest in nearly seven years

Economists say the fact that fewer workers were laid off reflects an improvement in overall business performance, but it is too early to say if the labour market is on a firm footing.
Economists say the fact that fewer workers were laid off reflects an improvement in overall business performance, but it is too early to say if the labour market is on a firm footing.ST PHOTO: ALVIN HO

Unemployment rate of residents down to 2-year low as labour market perks up

The labour market has continued to show slight improvements in the first quarter of this year, with retrenchments at their lowest in nearly seven years and the unemployment rate of residents hitting a two-year low.

From January to March this year, 2,100 workers were laid off, down from 3,680 in the previous quarter and half the 4,000 in the same quarter last year, according to preliminary data from the Ministry of Manpower (MOM) labour market report released yesterday.

Retrenchments were at their lowest since the third quarter of 2011, when such job losses numbered 1,960. The manufacturing, construction and service sectors registered declines in retrenchments in the first quarter of this year, said MOM.

Another sign of slight improvement was a drop in the resident unemployment rate to 2.8 per cent - a two-year low.

The seasonally adjusted overall unemployment rate also dipped, from 2.1 per cent in the preceding quarter to 2 per cent for the first quarter of this year; that of citizens remained unchanged at 3 per cent. The estimated number of unemployed citizens dipped from 58,600 to 57,900, said the report.

Said MOM: "While unemployment rates have declined from a year ago, further improvement will be harder to achieve."

It added: "Addressing potential job-skills mismatches remains critical, as the economy restructures and the profile of the resident labour force evolves."

The report also said total employment, excluding that of foreign domestic workers, contracted by 2,100 in the first quarter of this year, largely a result of a drop in work permit holders in the construction and marine shipyard sectors.

But sectors such as community, social and personal services, financial and insurance, information and communications, as well as transportation and storage, continued to see a rise in employment.

Yesterday, labour MP Patrick Tay said in a Facebook post that he was glad to see that retrenchments had fallen significantly and expected these to remain low for the first half of the year.

Economists said the fact that fewer workers were laid off reflected an improvement in overall business performance, but it was too early to say if the labour market was on a firm footing.

Associate Professor Randolph Tan of the Singapore University of Social Sciences, pointing to uneven hiring across sectors, said the unemployment situation could still fluctuate. The key to long-term improvement was to ensure that workers had the skills needed by companies in the ongoing economic transformation.

Maybank Kim Eng economist Chua Hak Bin found the total employment number "disappointing", adding that stricter manpower policies could be limiting overall employment growth, which could affect economic growth.

He said it was hard to imagine, in the longer run, that GDP growth could stay at around 3 per cent if employment growth stayed soft.

"We are pretty much at full employment and the risk is, with the tight foreign manpower restrictions, whether wage pressures will flare up more visibly," he added.

CIMB Private Bank economist Song Seng Wun expects improvements in the labour market to continue in the second half of the year, where there tends to be more job creation in the service sector.

But this is provided there is no significant shift in market sentiments as a result of a possible trade war between China and the United States, he added.

A version of this article appeared in the print edition of The Straits Times on April 28, 2018, with the headline 'Retrenchments hit their lowest in nearly seven years'. Print Edition | Subscribe