Does 3Q2020 mark the bottom of contraction in unemployment and retrenchments in Singapore?
Things appear to be improving in Singapore’s labour market, following the start of Phase 2 of the nation’s reopening on June 19.
Total employment excluding foreign domestic workers (FDWs) shrank by 26,900 in the third quarter ended September – a significant improvement from the historic 103,800 plummet seen in the quarter before.
This follows continued cuts in non-resident employment, the Ministry of Manpower (MOM) revealed in its preliminary estimates on Oct 30.
Cutbacks were sharpest in the Construction and Manufacturing sectors – which had only been allowed to resume operations gradually in the later part of 3Q2020.
Conversely, the services sector saw a growth in employment across its segments such as healthcare, public administration and food and beverage.
As at September, Singapore’s resident employment stood at 2.34 million, recovering from 2.29 million in June and inching closer to pre-Covid-19 level of 2.36 million in December 2019.
Non-resident employment conversely slid to 1.03 million in September, from 1.1 million in June and 1.17 million in December 2019.
Meanwhile, Singapore’s seasonally-adjusted unemployment rate edged up to 3.6% in September, deteriorating from the 3.4% registered in August. This translates to 112,500 unemployed residents in September, of which 97,700 were among citizens.
Unemployment among both residents and citizens rose, with resident joblessness hitting 4.7% in September, from 4.6% in the month before. Citizen joblessness similarly inched up to 4.9% in September, from 4.7% in August.
At 0.1 – 0.2%, the overall pace of increase in Singapore’s unemployment level was slower in September than the 0.3% to 0.4% point increase seen in the months before.
This is also reflected in the number of retrenchments which recorded a smaller rise to 9,100 in 3Q2020, from the 8,130 logged in 2Q2020. This is still higher than the layoffs seen in the heights of the previous recessions, except 1Q2009 during the Global Financial Crisis when 12,760 jobs were shed.
MOM expects layoffs to rise in 4Q2020 ending December in segments such as manufacturing, arts, entertainment and recreation and air transport, which have taken a hit from the management imposed to curb the spread of Covid-19 infections.
On the other hand, the authority reckons there will be a decline in retrenchments in the construction sector as activities resume gradually.
Touching on the labour market’s performance, MOM notes that resident employment has rebounded with the resumption of business activities, particularly in the services sector.
Says Manpower Minister Josephine Teo, "some positions had gotten vacated in the second quarter, and so in the third quarter, since business activities have resumed, so there is a little bit more backfilling of those positions”.
She adds that collective efforts such as wage cuts and retraining programmes were helpful in saving jobs.
“However, weakness in the labour market is likely to persist as companies and workers continue to operate in an uncertain economic environment [and] conditions for travel-related sectors continue to remain challenging,” MOM cautions in its report.
The fourth and last quarter of the year has historically seen a surge in employment levels due to increased seasonal spending, travel and tourism. This appears subdued for the year as consumer sentiment turns cautious and borders remain largely closed to tourism as several countries grapple with a second or even third wave of Covid-19 infections.
"We have a little bit of a reprieve now - the third quarter is, to me, a source of relief. But it simply means we've gotten ourselves to a level where the ship is more stabilised but we need to put in the effort to keep it sailing," stressed Teo.
Irvin Seah, senior economist at DBS Bank reckons that Singapore’s unemployment rate is reaching its peak, likely in the ongoing 4Q2020.
He says that while the jobless rate has edged up, the “pace of deterioration is moderating”, as policy measures on creating jobs and preventing job losses have been gathering momentum.
He estimates that job losses in the coming months will be less than the previous two quarters.
This is as labour numbers typically tail behind the economic growth cycle by one to two quarters, he says while referencing the republic’s latest GDP figures.
Advance estimates released in October point to a 7% year-on-year shrinkage of the economy in 3Q2020 compared to the 13.3% contraction in the quarter before. On a seasonally adjusted quarter-on-quarter basis, the economy rebounded with a 7.9% expansion in 3Q2020, from the 13.2% contraction in 2Q2020.
Seah’s hypothesis resonates fellow economist Barnabas Gan from UOB Bank
“Reportedly, the proportion of companies which indicated an intention to reduce salary or headcount has been on the downtrend since May 2020, while more companies have indicated plans to hire compared to the preceding months,” says Gan.
He expects Singapore’s unemployment rate to hit 3.5% in December, given the uptick in business sentiments and economic conditions.
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