Labour market outlook remains bleak despite silver lining in Q3, say economists

The number of employed locals rebounded to almost pre-Covid-19 levels in the period between July and September.
The number of employed locals rebounded to almost pre-Covid-19 levels in the period between July and September.ST PHOTO: KUA CHEE SIONG

SINGAPORE - Singapore's labour market showed signs of improvement in the third quarter, but the overall job market picture remains gloomy ahead.

While there was some bounce-back in local employment numbers, it is a faint silver lining amid the backdrop of rising retrenchments and declining overall employment, economists said.

The total unemployment rate came in at 3.6 per cent, up from 3.4 per cent in August, while the resident unemployment rate was 4.7 per cent, 0.1 per cent higher than the previous month, preliminary data released by the Ministry of Manpower (MOM) showed on Friday (Oct 30).

The figures for September are comparable with highs recorded during the Asian financial crisis in 1997 and global financial crisis of 2008-2009, but remain below the peak during the severe acute respiratory syndrome (Sars) outbreak in 2003, MOM noted in its report.

DBS Bank senior economist Irvin Seah pointed out that overall, the third-quarter report still paints a bleak picture despite the improvement in resident employment.

While unemployment rates are comparable with the period of the global financial crisis, this needs to be underscored by the fact that Singapore had not rolled out over $100 billion in fiscal stimulus then, Mr Seah said.

"Nonetheless, the labour market should bottom out in the fourth quarter and retrenchments should taper off. Now we are in the recovery mode, and the focus is on creating more jobs," he added.

Maybank Kim Eng senior economist Chua Hak Bin said: "The government's generous wage subsidies and hiring incentives have cushioned the impact on locals."

While the job market is on the mend, the recovery will be slow, he said, noting that employment will likely recover to only pre-pandemic levels in 2022 or even 2023.

Dr Chua said that the recent increases in the qualifying salaries for employment pass and work pass holders will likely dampen and slow the employment recovery for non-locals.

"The hiring of foreigners will likely pick up pace only when the pool of available locals tighten," he said.

Similarly, OCBC Bank head of treasury research and strategy Selena Ling said that there may be a limit to how far non-resident employment can bear the brunt of the impact from Covid-19 without affecting the competitiveness of the Singapore economy.

On the prospects ahead, Ms Ling said: "It's a trade off between the ramping up in economic activities, especially for construction and domestic services once we shift to Phase 3 versus the ticking clock for the various support schemes, such as the Jobs Support Scheme, which will taper off for selected industries going into 2021."

National Trades Union Congress (NTUC) assistant secretary-general and labour MP Patrick Tay emphasised the uncertainty ahead in a Facebook post on Friday.

"I expect both the retrenchment and unemployment figures will continue to stay high in the fourth quarter, as longer-term recovery is expected to be protracted against the continued restrictions in travel activity, ongoing Covid-19 safe management measures and restrictions, as well as an overall uncertain local/global outlook and stance across many industries with countries encountering second and third waves of outbreak."

Fellow labour MP Desmond Choo, who is also NTUC assistant secretary-general, said in his Facebook post that rising retrenchments in the third quarter are a concern, and the tripartite partners are working closely to support retrenched workers and job seekers, and help them find new jobs quicker.

He encouraged companies which are performing well to reward workers fairly, while urging affected firms to tap cost-saving measures to reduce job losses and the Jobs Growth Incentive to increase hiring.