Rising job losses are likely

OB losses are looming as Singapore's economy slows, with manufacturing and financial services companies expected to be among the first to cut staff.

This means unemployment is likely to rise over the next few quarters, while salaries will grow at a much slower pace, said the Monetary Authority of Singapore (MAS) in its latest half-yearly Macroeconomic Review, released yesterday.

The jobless rate for the third quarter is due out this Friday, and is expected to be higher than the 2.3 per cent seen in the second quarter.

Last week, Trade and Industry Minister Lim Hng Kiang warned that unemployment for the whole year is likely to come in higher than last year's 2.1 per cent given the effects of the global financial turmoil.

Economists are tipping that the jobless rate will reach 3 per cent by year end or early next year, and rise to close to 4 per cent towards the end of next year - a level not seen since the Sars period in 2003.

Although businesses are 'not planning to drastically reduce head count at the moment', the MAS said employers are turning cautious about hiring given the more uncertain outlook next year.

It cited the most recent Manpower Employment Outlook Survey, which showed that only a quarter of the 629 firms surveyed here plan to increase their head count in the fourth quarter.

The rest mostly expected no change, although some are still uncertain and 10 per cent will cut jobs.

Wages will also come under pressure. They are expected to grow about 5 per cent this year but rise only 2 per cent next year, said the MAS.

Already, salary hikes have declined sharply. Nominal wages climbed 11 per cent in the first quarter over the previous year, boosted by a round of civil service bonuses, but then rose only 3.1 per cent in the second quarter, partly because of a high base the year before.

'The outlook is generally bearish,' said OCBC economist Selena Ling.

'As the global downturn continues to prick strongly on people's minds, employers are going to be cutting back.'

Even pump-priming by the Government - which refers to state spending to stimulate the economy - is likely to be in infrastructure, which 'may not fully translate into local job gains'.

But Ms Ling added that unemployment last year - which fell to 1.7 per cent in the second half of the year - was an 'unbelievable' rate.

'A more normal rate is probably about 3 per cent, but that means the resident unemployment rate, excluding foreigners, will be higher than that,' she said.

The jobless rate, calculated by dividing the number of unemployed people by the total workforce, is also rising partly because more fresh graduates are entering the job market, said Citigroup economist Kit Wei Zheng.

He expects unemployment to average 2.6 per cent this year and continue edging up next year to hit 3.6 per cent.

Within manufacturing, the MAS believes hiring in petrochemicals and transport engineering 'should hold up relatively well', but electronics jobs will take a hit due partly to softening global demand for IT products.

The global financial crisis and bank consolidations will also translate into job cuts in the financial services industry here, where many multinational corporations have set up home. 'Several major foreign financial institutions have already announced retrenchments worldwide, which could lead to some job losses in their local offices,' said the MAS.

Even construction, which is still growing at a fairly healthy pace, is likely to see fewer jobs created as a shortage of labour and material leads to project delays, the MAS added.

OCBC's Ms Ling also expects business services such as commercial leasing and conveyancing to be hit, as they are 'very tied to the property boom', which is now over.

But selected industries such as hospitality and health care still have thousands of job vacancies that need to be filled, said the MAS.

The integrated resorts and related firms alone will generate about 60,000 jobs over the next few years, while 7,000 jobs are expected to be created in health care over the next five years.

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