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Explainer: The economic slowdown — how to deal with it, and what it means for jobs and wages

SINGAPORE — With Singapore’s economy in for a bumpier ride till the end of the year, some, especially fresh graduates looking for jobs or those who have just entered the workforce, might be thinking that they need to tighten their belts or hold off on big-ticket purchases.

Explainer: The economic slowdown — how to deal with it, and what it means for jobs and wages
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SINGAPORE — With Singapore’s economy in for a bumpier ride till the end of the year, some, especially fresh graduates looking for jobs or those who have just entered the workforce, might be thinking that they need to tighten their belts or hold off on big-ticket purchases.

For Singaporean millennials, some of whom are facing an economic downturn as working adults for the first time, the bleak outlook might raise even bigger questions: Will they lose their jobs, or will their wages take a hit?

Although exercising prudence is wise, economists and financial advisers have cautioned against drastically cutting back on spending lest it leads to a self-fulfilling prophecy.

“It is good to be cautious, but they don’t have to be pessimistic because it could compound the situation further,” said CIMB Bank economist Song Seng Wun.

Grim second-quarter export numbers released on Tuesday, coupled with a downgrade in the official forecast for the year, affirmed a gloomy trade outlook and a slowdown in the economy on the back of an ongoing trade war between the United States and China — the two world’s biggest economies.


It is clear that the job market has taken a hit, with companies being cautious on hiring. Based on the Ministry of Manpower’s latest quarterly labour report, unemployment rates inched up in the second quarter ending June 30.

Some graduates, such as those who studied business, could find job prospects to be more challenging, said economists.

The sombre trade climate means businesses will cut back or be more selective about where to invest, said Mr Song. And they could take the same approach when it comes to their headcount. “Businesses would be more careful about adding workers to their payrolls,” he added.

With manufacturing, especially the electronics industry, still in the doldrums, graduates in those fields might find it equally hard to secure jobs, said Ms Selena Ling, OCBC bank's head of treasury research and strategy.

Nevertheless, economists noted that there is still strong demand for jobs in other industries such as information and communications technology (ICT), education, healthcare and security.

“So, it’s not all doom and gloom,” added Ms Ling. “It’s probably a good time to train, reskill and upskill.”

It is hard, however, to know for certain when jobs and wages could be hit hard, said economists. But when the economy is in a down cycle, they said that cutbacks in jobs and wages typically take place when a company’s losses exceed its revenue.

A company in such a situation would start trimming its costs, such as by letting go of temporary staff or extra pairs of hands that it has hired during better times.

As the situation gets worse, the company might look at reducing bonuses followed by cutting wages. Only when left with no other option to stem losses, then retrenchments take place, said economists.


When the economy slows, borrowing costs come down. Financial institutions could cut interest rates, making it more attractive to take loans to buy that flashy car or a new house.

As much as that is tempting, economists and financial advisers said prudence is a better option amid the possibility of a protracted and escalating trade war.

Mr Sani Hamid, director of wealth management at Financial Alliance, pointed out that millennials have yet to experience a recession like those in 2008, which was caused by the global financial crisis, and in 2001, which was largely due to the bust. Thus, there could be complacency when it comes to ensuring that they have enough savings to ride out the storm.

He said that it is prudent from a financial planning perspective to have an emergency fund worth at least six months’ salary. In the event an individual loses a job, he could use the fund for his daily expenses.

For those who do not have such a fund, then building one up “should take priority”, Mr Sani added.

Financial advisers said that people should also avoid taking on more debt through loans or excessive credit card spending.

Bonuses are expected to shrink or sometimes evaporate in a gloomy economic climate, they said. The worst scenario is for one to have no job but piling debts.

But being prudent does not mean tightening the belt all the way to the ribs, economists pointed out, as that might just lead to a self-fulfilling prophecy.

Mr Sani said that if millennials have set aside some savings, coupled with having minimal debts, they can continue living the lifestyle they’re used to.

“Then you don’t have to overreact. There is no reason why you can’t do what you want to do and even more,” he added.


The trade war has dragged on for about a year, and though talks between US and China are ongoing to de-escalate the situation, financial markets continue to be spooked.

Questions have been raised whether Singapore might enter a recession, similar to those in 2001 and 2008.

Following the 2008-2009 financial crisis spawned largely by the United States sub-prime mortgage fiasco, Singapore plunged into its worst recession, forcing the country to dip into its reserves for the first time. During the recession period, which lasted for two years, the economy contracted 1.3 per cent in 2009, down from the 1.8 per cent growth in 2008.

Prior to that, the country entered a full-scale recession in 2001, due to the bust as well as the decline in the electronic and computer chip industries.

The Sept 11 terrorist attacks in New York City that year worsened conditions further. That recession, in which the Singapore economy contracted 2.4 per cent during the year, lasted for less than a year.

While the Republic has seen a quarter of sequential decline this year, Ms Ling said it narrowly escaped a year-on-year contraction.

Singapore is also not in a technical recession or at high risk of a full-year recession yet, she added.

Ms Ling said: “Unlike what happened during the recessions in 2008 and 2001, this is more like death by a thousand cuts.”

Mr Song pointed out that on the flipside, the slump has not spilled over to cover all goods and services. “So, there are still some positives,” he added.

“This downturn is interesting in a way because it’s not broad-based and there is still strong demand for our goods from other countries where the employment conditions are still good.”

It has not reached the point of recessions of the past, he noted.

“In those recessions, there was a crisis of confidence and affected all goods and services,” said Mr Song. “As for the current downturn, there’s still some light shining through the darkened skies and we hope it remains that way.”

Related topics

millennial Jobs manufacturing electronics economy

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