SINGAPORE — Against the backdrop of a weak economic performance in the first six months of the year, employment grew at a slower pace in the second quarter compared to a year ago, while unemployment crept up.

In its report on the employment situation in the second quarter released today (July 30), the Ministry of Manpower (MOM) said 15,700 more people held jobs in the second quarter, after employment contracted in the preceding quarter for the first time in six years. The growth was, however, lower than the 27,700 seen a year ago.

Unemployment rate rose from 1.8 per cent in March to 2 per cent in June, after seasonal adjustments. For Singaporeans, unemployment rate was 2.9 per cent in June, up from 2.6 per cent in March. In absolute terms, about 84,700 residents were unemployed as of June, inclusive of 75,200 citizens.

The employment statistics come amid slowing economic growth. Figures released earlier this month showed gross domestic product in the second quarter growing by 1.7 per cent on-year, down from the 2.8 per cent growth in the previous quarter. This prompted the Monetary Authority of Singapore and the Ministry of Trade and Industry (MTI) to review their growth forecasts for the year — the ministry had in May maintained its full year growth forecast at 2 to 4 per cent.

Given these factors, the job market is likely to see similar trends in the second half of the year, analysts said. While the labour market remains tight, employers would be cautious about hiring given the subdued economic outlook, they added.

Overall, employment growth picked up pace in the second quarter, growing 11.4 per cent. But this expansion paled in comparison to the 25.2 per cent seen a year ago. There were more than 3.6 million people employed as of June — 2.4 per cent higher than a year ago.

Hiring in the services and construction sectors drove employment growth in the second quarter. In the construction sector, employment went up 7.8 per cent following a decline in the previous quarter, as public sector construction activities increased. The manufacturing sector, however, continued to see contracting employment (down 3,500 workers), albeit more slowly than in the first quarter.

Layoffs also continued to decline for the second straight quarter — 3,100 workers were retrenched, 400 fewer than from January to March. Compared on-year, however, the total number of workers who got the pink slip was higher.

Economists were not surprised with the employment numbers, given the dips in domestic and external demand. The stringent foreign labour policy also contributed to tamping down employment growth, they added. But they were quick to point out that Singapore’s labour market remains tight.

CIMB Private Banking regional economist Song Seng Wun said: “Businesses are more selective about hiring given the more subdued economic outlook, but they are still hiring, the result of which, the labour market continues to be relatively tight. There is a slight uptick in unemployment rate, but it is still a full employment economy.”

On top of already-weak visitor arrival numbers, the strong Singapore dollar could crimp spending by tourists who come, which could see hospitality-related industries exercise caution in recruitment in the coming months, he added.

Ms Selena Ling, head of treasury research at OCBC, said businesses are slow to hire because of uncertainties in Greece and China.

Noting that China’s slowing growth is likely to continue and that the Singapore Governement has stated its foreign labour policy is here to stay, Ms Ling expects unemployment rate to continue hovering around 2 per cent. “With labour participation at an all-time high, there is only (so fast) the employment numbers can grow,” she added.

Mizuho Bank senior economist Vishnu Varathan added that job creation may not be as rapid for the rest of the year because of weak foreign currencies impairing tourist spending.

“I think there is an opportunity (for employment) to inch up slightly especially if global market conditions stabilise and China’s wobbles diminish, giving way to modest upside in regional demand. But the downside risks still somewhat overshadow a chance of an upside surprise,” he added.

Commenting on the employment figures on his Facebook page today, Manpower Minister Lim Swee Say also noted that citizen unemployment rate climbed to 2.9 per cent from 2.6 per cent even as the labour market remained tight.

Pointing to initiatives under the SkillsFuture movement, which aims to encourage lifelong learning among Singaporeans, he said: “We must make sure that this is not due to a growing mismatch between the skills and expectations of the job seekers versus the skills requirements and job offerings from the employers”.

CORRECTION: An earlier version of this story reported the employment contraction in the manufacturing sector wrongly. The correct figure is 3,500 jobs. We are sorry for the error.