Labour market on the mend, but economists warn not to ‘get too carried away’ given uncertainty over Covid-19

• Economists said economic activities in Singapore have been gradually ramping up
• However, the Covid-19 situation is constantly evolving and it could derail the gains Singapore has made
• While some sectors are able to tap a pool of Singaporeans to fill vacant positions, it will be harder for other sectors that need specialised workers

SINGAPORE — For the first three months of the year, the labour market looked to be on the mend based on the latest official estimates, but the outlook for the rest of the year hangs in the balance and will very much depend on Covid-19’s trajectory.

Manpower Minister Josephine Teo issued this note of caution during a media interview after a visit to the National Trades Union Congress (NTUC) Learning Hub along Bras Basah on Wednesday (April 28).

Commenting on the findings from the Ministry of Manpower’s advance labour market report, she said that while the job market looks to have improved, caution is needed as anything could still happen “given how the public health situation is evolving very quickly around the world”.

The report, released on Wednesday morning, showed that for the first time since Covid-19 struck, the total number of people employed in Singapore — excluding foreign domestic workers — has expanded by 4,800 after four straight quarters of declines.

It also stated that unemployment rates have continued to ease — though they remain far from pre-pandemic levels — and that retrenchments fell for a second straight quarter to 2,100. MOM said in its report that this was at pre-pandemic levels.

The full Labour Market Report for the quarter will be released in mid-June.

‘DON’T GET CARRIED AWAY’

Economists TODAY spoke to generally echoed Mrs Teo’s sentiments.

CIMB private banking economist Song Seng Wun said the gradual easing of Covid-19 restrictions in Singapore and the increase of more in-person activities are indications that economic activities are being ramped up.

As such, he expects the momentum gained during the first quarter to continue.

However, Ms Selena Ling, head of treasury research and strategy at OCBC bank, was more cautious in her outlook and warned people not to get “too carried away”.

She said Singapore is some way from resuming full economic activities as the nation has yet to exit from Phase Three of the gradual reopening of the economy.

The authorities had previously said this will not happen until there is evidence of vaccine effectiveness in preventing future outbreaks and a substantial proportion of the population is vaccinated.

However, Ms Ling pointed out that not only does the efficacy of vaccines vary among those produced by the various manufacturers, the entire global vaccination process itself has been hampered by Covid-19 mutations.

Mr Chua Hak Bin, an economist at Maybank Kim Eng, added that while the retrenchment figure for this quarter has dropped drastically, whether it remains that way depends on whether the virus causes another round of lockdowns.

In a Facebook post on Wednesday, NTUC’s assistant secretary-general Patrick Tay said that the unemployment rates are still relatively higher than prior to the pandemic.

In March, the overall unemployment rate dropped from 3 per cent to 2.9 per cent.

Likewise, Mr Tay said deeply affected sectors like aviation, aerospace, travel and tourism and even hospitality “continue to face exacting pressures with the very gradual resumption of air travel”.

“Moving ahead, I think it’s important to pay close attention to how the pandemic pans out for the rest of the year, how our vaccination rates progress, how the tapering off of the Jobs Support Scheme come end June will impact companies, and how air travel resumes,” he said.

REGAINING CONFIDENCE

Despite the calls for caution, Mrs Teo said the job market has taken a “significant turn” for the better as it suggests that employers are regaining some confidence and they have taken on board more workers.

She also attributed the improvement in the labour market to the strong take-up of the Jobs Growth Incentive, which is a scheme to support employers to expand their local hiring.

“It was very encouraging that employers were taking the opportunity to backfill the positions that had become vacant during the circuit breaker,” she said.

In its report, MOM had also stated that the growth in employment among Singaporeans and permanent residents had outpaced the declines in non-resident employment.

Mrs Teo said that given the current travel restrictions, employers have been looking to local candidates to fill vacancies.

While she did not specify which sectors these employers fall under, the economists told TODAY that it is likely these are jobs that do not require highly specialised workers, and finding someone to fill a position can be done easily.

Food services is one such sector, and Mr Song noted that there have been more food and beverage establishments opening than have been closing.

According to the national statistical office SingStats, 3,285 food and beverage businesses were created last year, compared to the 2,056 that had closed in the same period.

Indeed, the Monetary Authority of Singapore said in a report on Wednesday that consumer-facing businesses, such as retail and food and beverage, will be bolstered by improving consumer sentiments as the labour market improves.

However, as the border restrictions mean that employers cannot look to a pool of candidates from overseas to hire from, Ms Ling said that companies that require employees to have specialised skills, such as those in advanced manufacturing, might find it harder to fill vacant positions due to a lack of suitable candidates in Singapore.

Another sector that will be hard hit by the travel restrictions is the construction industry.

While there was a gentle rebound in employment in the first quarter through the addition of 200 workers, TODAY previously reported that the industry is facing a serious labour crunch since the pandemic started last year.

The situation is not helped by the recent border restrictions for travellers from India, due to a spike in infections in the country, which will limit the flow of Indian construction workers who form a bulk of the industry’s workforce.

In the meantime, the Government’s Covid-19 task force said on April 22 that delays should be expected in construction projects as these stricter measures are rolled out.

Ms Ling said that the authorities’ decision to temporarily loosen measures on April 26, to allow construction companies to recruit workers from China from May 7, will help the sector, but it will take time.

While Mr Song and Mr Chua said the Government could consider looking at other source countries beyond China to ensure construction projects do not get delayed further, Ms Ling said this situation might be the impetus the sector needs to lower its reliance on manpower by moving towards more automation and prefabrication of building components.