The Big Read: That jobs report — cause for worry? Yes, and no

SINGAPORE — Given the current jobs situation, the periodic release of the official jobs data — which has made for grim reading of late — is typically followed by much handwringing.

The latest 2016 labour market report issued by the Ministry of Manpower (MOM) earlier this month was no different: Among other things, it showed the number of vacancies falling while the pool of workers laid off continued to rise.

More job-seekers were also taking a longer time to land jobs, as the annual average unemployment rate for citizens and permanent residents (PRs) inched up last year.

However, as with all things, the statistics — while providing the big picture and a useful snapshot of the situation — did not tell the whole story. They certainly did not for human resources (HR) professional Stephanie Loon, who found a job less than two months after she was let go at the end of last year.

Or take the case of Mr Thomas Thu Ya Aung, a PR who has been working here for 13 years.

The information technology professional snagged a job about three weeks after he lodged his resume with a recruitment firm while he was still in employment.

Ms Loon, 43, joined the Children’s Cancer Foundation as its HR and administration manager in February after she left her employer of more than three years, a manufacturing multinational corporation that was undergoing restructuring. “I felt blessed, really … The fact that I’ve found a job, I’m quite fortunate,” she said.

She attributed her success in securing a new job — notwithstanding the fact that she sent out about 30 applications — to her 16 years’ experience in HR that spanned sectors ranging from healthcare to marine.

Mr Aung, 33, started his new job in January at logistics giant DHL as a business intelligence senior analyst. He had wanted to expand his skill set beyond software development, after spending seven years at IT multinational Hewlett Packard Enterprise as a senior developer. He credited his technical expertise, as well as analytical and communication skills, for netting the offer.

The experiences of workers such as Ms Loon and Mr Aung may not be uncommon, despite the dismal jobs data. Given the uneven performances of the different sectors, headline-grabbing figures from the jobs market reports might not provide an adequate picture.

For example, based on the MOM report, there were 77 jobs for every 100 job-seekers at the end of the fourth quarter, the third straight quarter in which the number of job-seekers outnumbered the openings available. It was also the worst ratio since September 2009, when the world was still reeling from the financial crisis.

But labour economist Walter Theseira noted: “For a jobseeker, especially somebody with either fairly specialised skills or who’s looking for a certain range of roles, the aggregate number doesn’t make a whole lot of sense … because it doesn’t tell them whether their industry or role is something that is being sought after.”

Beyond the headline figures, the MOM report breaks down the number of job vacancies according to industry and sectors: For instance, within the services industry, the telecommunications, broadcasting and publishing sector had 900 vacancies while legal, accounting and management services had 1,900 openings.

Among the various indicators, the experts picked out the unemployment situation as something that policymakers have to closely watch, although they reiterated that Singapore’s unemployment rate is low by international standards (The Republic is virtually experiencing “full employment”, by conventional yardsticks).

In particular, the annual average resident long-term unemployment rate, which refers to citizens and PRs jobless for at least 25 weeks, crept up last year. This could point to the worrying phenomenon of structural unemployment, where jobseekers lack the skills sought by employers or are not interested in the openings available, they said.

Manpower Minister Lim Swee Say said as much about a week ago when he weighed in on the MOM report. “My main concern is for those unemployed — the longer they stay unemployed, the harder for them to come back because the market keeps changing, technology keeps changing, the workplace keeps changing,” he said.

He added that the Government has singled out helping long-term unemployed individuals rejoin the labour market as a top priority, to ensure that the rise in the unemployment rate does not persist.

Dissecting the latest jobs market report, experts tell TODAY which are the key indicators to look out for, what they measure and whether the current situation is cause for concern.

UNEMPLOYMENT

Singapore’s unemployment numbers are broken down into several categories — notably the overall, resident and long-term unemployment rates.

The unemployment rate is a percentage of the number of unemployed individuals among the total pool of workers in the labour force aged 15 and older. An unemployed individual is defined as someone available for and actively seeking out work in a particular period of reference, including those who are in the process of starting a business or assuming a new job after the reference period.

The annual average overall unemployment rate — which covers residents as well as foreigners living in households here — inched up to 2.1 per cent last year, from 1.9 per cent in 2015.

For citizens and PRs, the annual average resident unemployment rate stood at 3 per cent last year, after hovering between 2.7 and 2.8 per cent for the previous four years. It was way back in 2003, when Singapore was hit by Sars (severe acute respiratory syndrome), which saw the rate jump to 5.2 per cent.

Nevertheless, the latest jobs data showed that more jobseekers were out of work for longer periods last year, with the annual average resident long-term unemployment rate reaching 0.8 per cent, up from 0.6 per cent between 2011 and 2015. More than one in four unemployed residents last year (26 per cent) were out of a job for at least 25 weeks, up from 21 per cent in 2015.

Dr Theseira, a senior lecturer at the Singapore University of Social Sciences, said the long-term unemployment rate showed the extent to which the gaps causing structural unemployment were persisting.

Calling last year’s figures “quite serious”, he said: “If they can’t find (a job) half a year later, it’s a problem because not only are they draining their savings … but also the longer they spend out of the job market, the more unlikely it is that they’ll return to the job market either ever or in a comparable position.”

Agreeing, United Overseas Bank economist Francis Tan said a rising long-term unemployment rate would be a red flag. Apart from slower economic growth over the past two years, this could be due to mismatches between jobs and the skills of the labour force, he noted. To address this, the Government has introduced several initiatives, such as raising wage subsidies to reduce the cost of labour and encourage employers to hire workers, he said.

He noted that long-term unemployment could have been higher, if not for the rise of the gig economy, with workers now turning to the flexibility of freelance work to stay employed.

CIMB Private Banking economist Song Seng Wun stressed that long-term unemployment trends were more crucial to monitor, compared with the headline numbers. “In extreme cases, we might find that … the economy’s creating jobs, for which the current labour force is of no use. If we do see the long-term unemployment rate trending up, and yet the economy’s creating jobs, then we (have to) ask, what’s happening — are these people all structurally unemployed?” he said.

RE-ENTRY INTO EMPLOYMENT

In this volatile economic climate, a key question is how quickly workers made redundant can rejoin the workforce.

Based on MOM figures, nearly one in two (47.9 per cent) citizens and PRs who were laid off found new jobs within six months last year, down from about 54.6 per cent and 54.3 per cent in 2014 and 2015, respectively.

The re-entry rate measures residents laid off by private-sector firms (with at least 25 staff members) and the public sector who rejoined the workforce within half a year.

The re-entry rate feeds into the long-term unemployment rate: If a worker took more than half a year to be rehired, this would push up the long-term unemployment rate, Mr Song noted.

Dr Theseira said he was most worried about the re-entry rates of the more well-educated and older workers. The annual average re-entry rate for degree-holders, for instance, was 42.5 per cent last year, down from 47 per cent in 2015.

By comparison, the re-entry rate for those with secondary qualifications stood at 53 per cent, although this is markedly lower than 2015’s 61.7 per cent.

Meanwhile, just four in 10 laid-off residents aged 50 and above re-entered the workforce within six months, compared with more than six in 10 (61.2 per cent) among those below 30.

This means there is a “significant chance” middle-aged white-collar workers, who are far more specialised than their younger counterparts, would not return to work at a level commensurate with their previous positions, said Dr Theseira.

This is “a lot of human capital we’re losing out on”, he added.

Employers are more reluctant to take the risk of hiring PMETs (professionals, managers, executives and technicians) with vast experience given the higher hiring costs vis-a-vis younger skilled workers, he noted.

Businesses may hold the view that even if these younger workers are “not exactly the right fit, maybe I can train them”.

“But if you hire somebody who’s 40 to 50 years old (with) significant management experience … what if he can’t do his job? It’s going to be a total disaster,” he said.

Credit Suisse economist Michael Wan said the re-entry rate also sheds light on the ease with which workers switch between sectors. “That’s important because the longer you stay out of a job, the more easily you become discouraged (and) the higher the probability you’ll drop out of the labour force … and your skills might be viewed by future employers as less relevant over time,” he said.

JOB REDUNDANCIES

For the whole of 2016, the number of job redundancies climbed to 19,170, the worst since the 2009 global financial crisis. The figure captures not only retrenchments, where permanent staff are terminated because their roles have been made redundant. They also include workers whose term contracts are ended prematurely for the same reason.

Mr Song noted that the bulk of redundancies stemmed from the manufacturing sector. Weighed down by weak demand, the sector made up nearly a third (32.8 per cent) of all layoffs last year.

The bleeding in the manufacturing sector has also spilled into the services sector. For instance, firms offering services to shipyards, including those in financing and accounting, have had to shed workers too, after their bottomlines took a hit due to slowing orders.

Mr Song said that employers here tend to hang on to their workers until they are left with no choice. “(They) cut pay (but) still can’t manage, cut bonus, still can’t manage, (then) jobs are on the line,” he said.

Dr Chua Hak Bin, a senior economist at Maybank Kim Eng, noted that even some high-paying and value-added jobs, such as those in the financial sector, are being lost, with global banks reducing their presence here and in the region.

“That’s not such a good thing. We got to ask, is it because of competitive reasons that they’re moving elsewhere? Is it because of cost reasons? Or is it just a specific company-related reason?” he said.

As the economy restructures, the job redundancy numbers alone are not necessarily instructive in gauging the health of the economy.

Some jobs become obsolete over time, and there is little point in saving these, Dr Chua said. What matters is attracting new and emerging industries to Singapore, through the Government’s continuing push to adapt to technology and court new areas of growth, he added.

TOTAL EMPLOYMENT

The change in the total number of people in employment compares the difference between the number of employed individuals in the economy at the end of a period of reference, with that at the close of the preceding period.

It gives a sense of the “additional capacity” in the economy and is linked to the size of the labour force and economic growth potential, said Dr Chua.

Excluding foreign domestic workers, total employment expanded by 8,600 last year, the slowest growth since 2003.

The number of Singaporeans and PRs in employment grew by 11,200, up from 700 in 2015, although this increase was markedly slower than the levels seen between 2012 and 2014. Foreign employment (excluding foreign domestic workers) shrank for the first time since 2009 as the Government continued to tighten the supply of imported labour, with work-permit holders in manufacturing, marine and construction accounting largely for the dip.

To support annual economic growth of up to 3 per cent, Dr Chua said total employment should grow at a pace of between 35,000 and 40,000 each year — at the upper end of the 25,000 to 40,000 range that the Government had said Singapore will strive for in the next three to five years.

To raise growth to such levels, Dr Chua suggested the Government adjust its policies to incentivise hiring.

He cited the Jobs Credit scheme introduced during the 2009 downturn, and proposed topping up Central Provident Fund (CPF) contributions and co-funding training fees. On foreign employment growth, he said that the Republic should make do with fewer workers for lower-end jobs, such as those in cleaning. On the other end of the spectrum, higher-end jobs requiring skill sets that are lacking here would bring with them “very high multiplier effects”, he said.

Noting that a large number of start-ups in the United States were started by foreigners, he added: “Foreigners who can contribute in that space … venture capital (or) the tech area will (bring) bigger gains for the economy.”

Dr Theseira pointed out that total employment was a lever controlled by the Government’s foreign-labour policy. Owing to an inadequate supply of Singaporean and PR workers, companies cannot grow their employment without hiring foreigners, but they are prevented from doing so because of curbs on imported labour. The Government had previously said that the old strategy of growing the economy was unsustainable, and companies need to be manpower-lean and raise productivity.

Mr Tan reiterated that total employment was an important indicator of economic growth, but it must also be measured hand-in-hand with labour productivity.

In tandem with rising unemployment and layoffs, Mr Song said the number of new jobs created would naturally shrink, as the demand for labour slows amid weaker growth in Singapore and globally.

“But jobs are still being created,” he stressed. “The only time when jobs are not created is during a recessionary period.”

VACANCIES

Without a doubt, jobseekers are facing a tougher jobs market, with seasonally adjusted job vacancies falling from 50,800 to 47,600, between the end of the third and fourth quarters, to hit a four-year low.

As measured by MOM, vacancies are defined as unfilled positions for which organisations are actively recruiting employees from external sources. The job-vacancies-to-job-seekers ratio measures the estimated total number of vacancies for the economy against the number of unemployed individuals.

On the employment front, Mr Wan said sectors that rely less on labour, such as manufacturing, have fared better than those that are more labour-intensive, such as retail and business services, which are cutting back on workers.

Barring a significant sustained pick-up in global growth, the divergence will continue between “the better performance in external (oriented) sectors and the weaker performance in the more domestic-oriented sectors”, he said.

Dr Theseira said the number of vacancies could indicate the economy’s capacity to take on more workers, and the latest figures showed that firms remain “very cautious” and are not looking to expand their activities.

Mr Song said that while businesses have put the brakes on hiring, vacancies still exist in growth areas, such as cyber security, compliance and the digital economy.

Accounting students, for instance, might want to rejig their skills to meet the demand for audit and compliance roles, he added.

Dr Chua said that while Singapore has largely been accustomed to more openings than jobseekers — where individuals could afford to be choosy — “clearly that’s no longer the case, as of last year”.

As Mr Song put it: “(When the ratio is) above 1, (it’s) not too bad, there are jobs looking for me … but if it drops below 1, you say ‘dang, I’ve to go look for work’.”

THE BOTTOM LINE

Unlike previous downturns where jobs were hard to come by, the situation that Singapore and its workers find themselves in is different this time. The Government has, on several occasions, flagged its concerns on the job-skills mismatch.

Mr Lim, the Manpower Minister, last month spoke of the need to minimise the risk of both “missed” matches — jobseekers unfamiliar with where to seek jobs and pursue appropriate skills — and mismatches between jobs and skills.

In a nutshell, the labour market is in some ways caught in a vicious circle, and the only way to break out of it is for workers to acquire the right skills for the growth areas, where companies are unable to expand and create more jobs because of a shortage of local manpower with the relevant skills, and the stricter foreign manpower policy, which prevents them from sourcing hires from abroad.

Urging workers not to be disheartened, Mr Song said the circumstances are simply different — but that does not mean workers will be necessarily worse off. For one, there are faster and bigger rewards for those who can come up with new ideas, especially in the digital economy.

“There are still jobs out there. It might take longer to get them or you might want to ... go back to school to learn something which might be more in demand,” Mr Song said. “At the same time ... there’re enough opportunities in the digital economy that allows people to say, ‘I have a brilliant idea ... if I can do this, I just need people to fund me’ — opportunities like that can also come along.”

Just ask Mr Aung. His present role entails picking up new technologies and developing prototypes quickly — things he had been doing in his spare time while in his previous job. “Having done multiple personal projects using those technologies in my free time ... I was able to showcase that I’m able to meet what the job (requires),” he said.