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Inflation, supply chain disruptions from Russia-Ukraine conflict may dampen Singapore's labour outlook: MOM

SINGAPORE — Singapore's labour market recovery is likely to be sustained in the coming year, but the Russia-Ukraine conflict could cloud the Republic's employment situation, officials said on Monday (March 14). 

Inflation, supply chain disruptions from Russia-Ukraine conflict may dampen Singapore's labour outlook: MOM
Barring the uncertainties from the Russia-Ukraine conflict, the labour market recovery "should be sustained in 2022 as business activities continue to pick up", a Manpower Ministry report said.
  • The Russia-Ukraine conflict could worsen the labour market outlook through increased inflation and supply side shocks 
  • The pace of economic recovery is expected to be more gradual in 2022 due to the "significant improvements" already experienced in 2021
  • In 2021, total employment had increased, after a sharp contraction in 2020
  • Annual average unemployment rates in 2021 were significantly lower than in 2020

SINGAPORE — Singapore's labour market recovery is likely to be sustained in the coming year, but the Russia-Ukraine conflict could cloud the Republic's employment situation, officials said on Monday (March 14). 

Speaking at a media briefing for the Ministry of Manpower’s (MOM) 2021 labour market report, Mr Kenny Tan, divisional director of manpower planning and policy division at MOM, said the authorities are keeping a close eye on developments from Ukraine, which could lead to higher inflation through higher energy prices, for instance. 

"Inflation is a risk that my colleagues at the Ministry of Trade and Industry are concerned about, and that will affect business competitiveness and viability, and therefore there may be some knock-on effects on the labour market," he said. 

Apart from inflation, the authorities are also looking closely at supply disruptions, MOM permanent secretary Aubeck Kam added. 

"If there is an impact to our economy, then there will be a corresponding impact on our labour market," he said. 

MOM's quarterly labour report shows that the pace of labour market recovery is also expected to be more gradual in 2022 due to the "significant improvements" already experienced in 2021.

Barring the uncertainties from the Russia-Ukraine conflict, the labour market recovery "should be sustained in 2022 as business activities continue to pick up". 

Domestically, the outlook on various sectors continues to be uneven. 

"Barring a sharp slowdown in the global economy, growth in the outward-oriented sectors is expected to remain positive," said the report. 

Growth is expected to remain healthy in information and communications, and financial and insurance services sectors, due to "robust demand for IT and digital solutions, and credit and payment processing services respectively" that should provide sustained labour demand in these sectors. 

Consumer-facing sectors, such as food and beverage services and retail trade, are also projected to benefit from the gradual easing of Covid-19 measures in Singapore, and more workers will be needed to support this pick-up in business activities.

However, the recovery of the tourism and aviation-related sectors is expected to be slow on account of the gradual loosening of travel restrictions globally, and the nascent recovery in global travel demand.

"Employment levels in these sectors may take longer to return to pre-Covid levels," said the report. 

The report also showed that in 2021, total employment had increased, after a sharp contraction in 2020. 

Here are the employment indicators at a glance: 

EMPLOYMENT

The report showed that in 2021: 

  • Total employment in Singapore increased by 41,400, after a sharp contraction of 166,600 in 2020 
  • Non-resident employment fell by 30,000 in 2021; resident employment offset this decline, increasing by 71,300

The increase in employment was more significant in the information and communications, health and social services, professional services, administrative and support services, and financial services sectors.

On the other hand, resident employment fell moderately in accommodation, air transport and supporting services, and arts, entertainment and recreation sectors, "reflecting the effects of tight travel restrictions for the most part of the year", the report said.

Among non-residents, the decline was mainly driven by Employment Pass and S Pass holders, whose numbers fell by 15,300 and 12,200 respectively, while Work Pass holders fell by 2,400.

Non-resident employment declined in all sectors, except for construction, which was boosted by the increase in the final quarter of the year as border restrictions progressively eased. 

UNEMPLOYMENT

The annual average unemployment rates in 2021 were significantly lower than in 2020, as the unemployment situation "improved steadily throughout the year". 

  • Unemployment rates fell from 3.0 per cent in 2020 to 2.7 per cent in 2021, resident unemployment fell from 4.1 per cent to 3.5 per cent, while citizen employment fell from 4.2 per cent to 3.7 per cent
  • In January 2022, unemployment rates declined to around December 2019 levels 
  • The annual average resident long-term unemployment rate in 2021 stood at 1.0 per cent, which was unchanged over the year and remained elevated compared to 2018 and 2019. This is because "structural mismatches tend to take longer to dissipate", said the report
  • Nevertheless, business slack has "ameliorated significantly", with retrenchments falling from a high of 26,110 in 2020 to 8,020 in 2021, below levels seen in pre-Covid years
  • With the pick-up in business activities, there were also 1,200 employees placed on short work-week or temporary layoffs by the fourth quarter last year. The number remains above pre-pandemic levels, but is lower than in the third quarter where there were 4,060 employees who were placed on such arrangements.

The annual re-entry rate among retrenched residents rose from 62 per cent in 2020 to 66 per cent in 2021, which is a six-year high.

  • There was also broad-based improvements across age, education and occupation groups
  • The seasonally adjusted recruitment rate also trended higher to 2.5 per cent in the fourth quarter of 2021, the highest rate since 2014
  • The seasonally adjusted resignation rate held steady over the quarter at 1.7 per cent, slightly below the typical pre-Covid rate

JOB VACANCIES

In December 2021: 

  • The seasonally adjusted number of job vacancies rose further to 117,100
  • The ratio of job vacancies to unemployed persons also rose to 2.11 compared to 1.95 in September

The high number of job openings was driven in part by travel restrictions impacting the inflow of migrant workers, said the report. 

"However, with the gradual easing of these restrictions, we expect non-resident workforce numbers to improve in 2022, and job vacancies in sectors with heavier reliance on migrant workers to abate," said the report.

Growth sectors such as information and communications, financial services and professional services continue to see robust resident employment growth, and job vacancies also increased and remained high.

HOW INFLATION CAN CAUSE DIP IN EMPLOYMENT

Economists whom TODAY spoke to said that the Russia-Ukraine conflict could lead to a fall in employment for a variety of reasons. 

Maybank economist Chua Hak Bin said that due to the conflict, he had lowered his forecast for 2022 from a 100,000 increase to a 75,000 increase in employment. 

He said that due to the conflict, manufacturing, transport and hospitality services will be impacted by a sharp economic slowdown in the European Union, higher energy costs and supply chain disruptions. 

"High wage and other cost pressures may also deter firms from hiring and expanding their Singapore headcount," he said. 

Head of treasury research and strategy at OCBC Bank Selena Ling said that the Russia-Ukraine conflict will aggravate supply chain bottlenecks and drive prices higher for a whole suite of commodity and food products, implying higher inflation for the time being. 

Due to these risks, consumer and business confidence will also be affected should the conflict drag on. 

"The labour market may be impacted in at least two ways — firstly, hiring intentions may be put on hold, (as companies) wait and see what happens with the conflict, and secondly, firms may try to manage costs by also trimming wage costs and managing wage growth expectations," she said. 

DBS senior economist Irvin Seah said that while domestic-oriented sectors can pass on the increased costs to the consumer, export-oriented firms may not be able to do so. 

"(Export-oriented firms) need to compete with cheaper suppliers from other countries," said Mr Seah, adding that such firms may freeze their hiring or even lay off workers in such times.

"These firms tend to be bigger sized companies with the ability to hire more people." 

CIMB economist Song Seng Wun said that stagflation — when the economy is experiencing economic stagnation, high inflation and high unemployment — could be possible depending on how long the conflict lasts and how widespread it becomes. 

While the situation on the ground is ever-changing, Mr Song said that should inflation levels — forecast to be at 2-3 per cent this year — inch up any higher due to the implications of the conflict, then the consumer's increase in spending power may not be able to match inflation rates. 

"Persistently high inflation will start to affect our consumption activities if the increase in cost (of living) outstrips wage growth," he said.

"With high inflation, there could be marginal or no growth as a result of you and I curbing our consumption."

He added that if the conflict lasts longer than six months, there could even be negative economic growth and a continual negative impact on the labour market. 

However, Mr Seah is confident that labour growth will remain strong despite the Russia-Ukraine conflict. 

"The impact of the war remains marginal at this point in time, and much depends on whether the conflict escalates," he said. "The situation is still fluid and I don't think anyone could make a call on how it would pan out."

Related topics

employment MOM labour market economy

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