The worst is not over yet for Singapore's labour market, experts said yesterday in response to the latest data on it for the second quarter of the year.
They pointed to the tapering of wage subsidies, lack of demand and prolonged uncertainties as reasons for expecting retrenchments to continue and unemployment to climb further for the rest of this year.
The headline seasonally adjusted unemployment rate, which includes foreigners, rose to 3 per cent in July, while the rate for residents - Singaporeans and permanent residents - rose to 4.1 per cent, said the Ministry of Manpower yesterday.
OCBC Bank's head of treasury research and strategy Selena Ling expects the headline rate to rise to 3.5 per cent in the second half of the year, while Maybank Kim Eng senior economist Chua Hak Bin expects it to peak at slightly above 4 per cent.
DBS Bank senior economist Irvin Seah expects the overall rate to rise to 3.6 per cent, with the resident rate hitting 4.2 per cent.
Ms Ling said some companies are starting to bite the bullet and recognise that certain industries like aviation and hospitality will take months if not years to recover.
"The number of workers on short work week or temporary layoff may fall in the coming months or quarters, but that's likely to be due to a combination of other sectors returning to more normalised levels of activity combined with some companies taking the tough decision to lay off rather than keep workers in cold storage for a much longer period," she said.
National Trades Union Congress assistant secretary-general Patrick Tay said in a Facebook post that the impact of retrenchments may not be fully seen yet, as retrenchment figures reported do not include older workers who were not re-employed, foreigners whose work passes are not renewed and workers who may have left their jobs as their employers are facing impending liquidation or insolvency.
Already, the figure has hit 8,130 in the second quarter, the highest level since the 2009 global financial crisis.
Lower-skilled workers have been disproportionately affected by retrenchments among locals so far, but DBS' Mr Seah expects the impact to broaden to professionals as bigger firms have to decide whether to restructure their businesses.
He added that the financial sector, which has been largely shielded from the impact of the crisis so far, will be affected if the recessionary cycle drags on, especially when the corporate loan moratorium expires some time next year and if non-performing loans and property loan defaults start to pick up.
Maybank Kim Eng's Mr Chua said the large number of workers on a shorter work week and temporary layoff - 81,720 - is worrying and suggests that layoffs will likely continue with the tapering of wage subsidies.
"Firms deferring layoffs may have to face the reality of a prolonged demand slump and rightsize their manpower needs. These will likely include the more distressed sectors, including the travel, hospitality, retail and recreational sectors," he said.
Experts agreed that broad-based government measures supporting employment cannot continue indefinitely, and the focus will have to shift.
Ms Ling said the focus ahead may be more on training and transiting workers from government-funded opportunities or jobs offered by public sector agencies, to the long-term job offerings of private sector employers, to avoid any structural unemployment problems down the road.
Singapore Business Federation chief executive Ho Meng Kit said what is needed is better outreach of support schemes to businesses so that companies understand them and make use of them.
He added that both businesses and workers have to adjust.
"Companies, for example, have to redesign jobs to fit the current employment profile and help workers upskill during this period to acquire new capabilities. Workers should stay nimble and be willing to adapt, and take up roles in sectors to remain relevant and competitive," he said.