Job market remains strong but signs of cooling could intensify if global economic troubles persist: Economists

SINGAPORE — While the job market remains strong with six straight quarters of employment growth, there are signs that the labour market will continue to cool in the second half of the year should global economic troubles persist, say economists.

They add that factors such as China’s tepid recovery and central banks continuing their interest hikes could lead to dampened economic growth and hence a slowdown in the labour market. 

They were reacting to the Ministry of Manpower’s (MOM) labour market report on Thursday (June 15), which showed that employment here grew for the sixth consecutive quarter in the three-month period ending March 2023. 

Total employment grew by 33,000 in the first quarter of the year, bringing total employment to 3.8 per cent above the pre-pandemic levels.

However, growth has been moderating over the last two quarters. Employment grew by 75,900 in the third quarter of last year and then by 43,500 in the fourth quarter, before further moderating to an increase of 33,000 in the first quarter of this year.  

Job vacancies and ratio of job vacancies to unemployed persons still remain high but both have eased, from 126,000 to 99,600 and 2.33 to 2.28 respectively.

“While the labour market remains tight, there are some signs of cooling labour demand,” said MOM on Thursday.

WHY IT MATTERS 

With geopolitical tensions and the possibility of a global recession on the minds of many in the first half of the year, there have been concerns that the job market could weaken. 

Although Singapore has enjoyed six straight quarters of employment growth, the moderating numbers could be a sign of worsening global economic conditions to come, said OCBC chief economist Selena Ling. 

“The softening labour market outlook is unsurprising given the deterioration in the external environment due to the United States regional banking problems, recent market disappointments with the pace of China’s reopening, ongoing global semiconductor slump,” she said.

She added that hiring intentions and employment growth have begun to soften and “may moderate in coming months since growth momentum is likely to slow in the second half of 2023”. 

This will likely happen if China’s recovery remains tepid or the major central banks such as the US Federal Reserve continue to tighten monetary policy, she added. 

According to MOM, there has still been robust employment growth in sectors like financial services, public administration and education, professional services as well as health and social services.

In contrast, employment declined in retail trade and food & beverage services as seasonal hiring for festivities ended.

Experts said that the decline in employment in the above sectors are not surprising, as it is a signal that economic conditions are “normalising”. 

Said CIMB Private Bank economist Song Seng Wun: “It’s really because employment is normalising after Singapore fully relaxed (restrictions) post-pandemic.” 

He said that in industries that couldn’t bring in foreign labour during the pandemic, there was a “hiring spurt” in the past six quarters that has begun to taper off as the labour conditions have stabilised. 

EASING MARKET TIGHTNESS

Job vacancies declined for the fourth consecutive quarter, from 126,000 in the fourth quarter of last year to 99,600 in March, said MOM.

While the ratio of job vacancies to unemployed persons remained high at 2.28, this was a decline from December 2022's 2.33.

Mr Song said that while there has been a decline in job vacancies, it is only marginal when compared against the number of unemployed persons. 

"For now, while many businesses are mindful of external risks and pullback in economic activities, enough businesses still see a need to hire," he said. "More jobs are still being created than people who are looking for jobs." 

MOM said that vacancies were spread across different industries, particularly in growth industries such as:

• Information and communications (8,100) 
• Health and social services (7,800)
• Professional services (7,700) 
• Financial services (6,300)

In the labour report on Thursday, MOM encouraged employers and workers to tap Government programmes to adapt to the changing environment and “press on with business and workforce transformation”.

RETRENCHMENTS CONTINUE RISING

Retrenchments continued going up to 3,820 in the first three months for the year, up from 2,990 in the last quarter of 2022.

According to MOM, this was driven by three sectors:

• Electronics Manufacturing (from 670 to 1,190)
• Information & Communications (from 370 to 560)
• Financial Services (from 260 to 540)

“Retrenchments in other sectors have remained stable,” it added. 

Reorganisation or restructuring was the main reason for 47.7 per cent of retrenchments, followed by recession or downturn at 19.4 per cent.

Nonetheless, unemployment rates remained low in March 2023 at 1.8 per cent overall, 2.6 per cent for residents and 2.7 per cent for citizens.

DBS economist Chua Han Teng noted that while retrenchments rose for the third straight quarter leading up to the first quarter this year, it was "not broad-based and remained contained".

"In fact, the uptick was mainly concentrated in the manufacturing sector, especially electronics, which is facing cyclical headwinds from a global downturn amid weak global demand and high inventories," he said.

He added that there might still be some pressure for manufacturing firms to reduce their headcounts in the near-term, "until we see some signs of a convincing turnaround in Singapore’s electronics cycle".