Job market to remain weak, wage gains likely to slow

SINGAPORE — The job market will remain weak in the coming months and wage pressures are likely to ease amid subdued economic growth and ongoing restructuring in some industries, the central bank said on Tuesday (Oct 25).

"Overall, there is evidence to suggest that a modest degree of slack has emerged in the labour market. This reflects the confluence of weaker overall labour demand, with growing mismatches among the resident workforce," the Monetary Authority of Singapore (MAS) said in in its twice-yearly Macroeconomic Review report.

Redundancies have picked up and resident workers who have been laid off are finding it harder to return to the workforce, the central bank noted. The re-entry rate has fallen steadily from 50.5 per cent six months ago to 45 per cent as of June, the lowest since June 2009. Meanwhile, the resident long-term unemployment rate rose to 0.8 per cent in the first half of this year, suggesting that a greater share of displaced workers have been staying out of jobs for longer durations. Professionals, managers, executives & technicians (PMETs) were the worst hit, accounting for more than two-thirds of the layoffs, the central bank noted.

Hiring in both the external-facing and domestic-oriented sectors continue to be subdued, following the step-down in the first half of last year, said MAS. From January to June this year, headcount in the external-facing segments contracted, reflecting sluggish global economic growth and ongoing restructuring. The employment decline was most evident in manufacturing which saw a reduction in headcount by 5,300, as the electronics cluster was affected by multinational firms reconfiguring global operations, while the marine & offshore engineering segment was hit by low oil prices.

In the external-oriented sectors, employment in accommodation services turned negative with a loss of 800 jobs in the first half of this year, as casual workers exited after the higher seasonal year-end demand for labour receded, the central bank said. Headcount in financial & insurance services contracted by 700, in part reflecting consolidation following strong employment growth in previous years. In addition, there was a re-classification of firms to the professional services industry.

The job losses have continued in the second half of the year. Earlier this month, Keppel Corp said its offshore and marine division slashed 3,080 jobs worldwide in the third quarter, including 660 in Singapore, and warned it will reduce more of its local headcount as the persistent global oil glut forces a cutback in exploration and drilling activity. Singapore Press Holdings also said this month after a review of its core media business that it will cut up to 10 per cent of its current workforce of more than 4,000 over the next two years.

On a brighter note, the transport & storage sector added 3,500 jobs in the first six months, the MAS report said, boosted by stronger hiring demand following the entry of two new public transport operators, Tower Transit and Go-Ahead Group.

Another growth area for jobs is the burgeoning start-up sector. In a special feature accompanying its report, the MAS noted that start-ups provided employment to 345,000 people as at end-2014 amid a rapid rise in new company formation. The start-ups provided close to 10 per cent of jobs in Singapore - up from less than 8 per cent in the mid-2000s. At end-2014, almost half the active firms in high-tech sectors were young firms registered within that calendar year, compared to 34.5 per cent in 2004.

In the second half of this year, wage pressures are likely to ease given the weak economic environment, subdued employment demand, lower turnover and emerging slack in the labour market, the central bank said.

"While hiring in sectors such as retail trade and accommodation & food services should improve slightly in the second half due to the year-end festivities, a substantial number of these hires are likely to be casual workers, which will put downward pressure on wage gains," it said in its report.

Salary increments will remain unevenly distributed, higher in sectors such as community, social and personal services sectors and information & communication services where vacancy rates are higher, and lower in sectors with greater slack, such as manufacturing and construction.