SINGAPORE (Dec 20): Singapore’s labour market came under some pressure earlier this year, as the slowing economy saw hiring sentiment turning more cautious across industries. In its most recent Labour Market Report for 3Q2019 ended Sept 30, the Ministry of Manpower (MOM) highlighted that, on a seasonally-adjusted basis, overall unemployment was up 0.1 percentage point to 2.3% - the highest level it has been at for the year (see Chart 1). This comes as both resident and citizen unemployment levels inched up 0.1 percentage point each to 3.2% and 3.3% respectively. It translates into a total of 138,800 unemployed persons, of which 74,200 are residents and 64,600 are citizens.
Simultaneously, retrenchment levels were also up this year with the number of employees laid off increasing to 2,430 in 3Q19 (see Chart 2). This follows re-structuring and re-organisation efforts as well as weaker industry performance, MOM’s report points out.
Among the various industry sectors, the retail trade industry, suffered the biggest magnitude of jobs lost in 3Q19, with a 1.2% contraction in payrolls. The number of jobs lost in the wholesale trade was down 0.6% in the same period. Jobs were lost in three manufacturing sub-sectors as well, with cuts ranging from 0.8% to 0.3%.
Nevertheless, employment rose across the board. Headcount for the financial services industry, for example, increased by 1.4%. There were pockets of job cuts within this sector, including at brokerage Maybank Kim Eng financial institutions such as Deutsche Bank and the HSBC Holdings.
Now, as the composition of the economy shifts, the segment of workers most vulnerable to losing their jobs are the PMETs. In 3Q2019, 72.6% of the total retrenched workforce were PMETs. This is because they form a large proportion of the workforce, the MOM says.
On the somewhat positive note, the ministry points out that improvements were seen in the rate of re-entry into employment within six months of being retrenched, with the rate hitting 65.4% in 3Q2019 from 59.9% in 2Q2019.This is because total employment has been on a growth trend, rising to a year high of 21,700 in 3Q2019 (see Chart 3). This follows a rebound in the construction sector, MOM says.
Not all observers find reasons for cheer. A more critical measure of the labour market is the ratio of job vacancies to unemployed persons, says Mohamed Faiz Nagutha, Asean Economist at Bank of America Merrill Lynch. The current ratio of 0.83 available jobs to 1 unemployed person at 3Q2019, is “worrisome”, he notes. “Anything less than 1 shows that the economy is in an unhealthy state”, he explains, adding this implies the number of available jobs is insufficient to serve all the unemployed, even if they undergo retraining.
Even so, Nagutha says the labour market performance, could have been worse. “Although unemployment numbers are up, it is better than the historic lows and is as not as bad as it could have been, given the extent of the slowdown in [Gross Domestic Product (GDP)],” he says, adding that fortunately, wages have been growing. With MOM projecting a real wage growth of 3.8% between 2014 to 2019, higher than the current inflation level of 1.2%, the labour force can benefit from a “significant growth in their income”, he says.
Earnings of staffing firms dip
In this current labour market, recruitment companies too have been affected. HRNetGroup, for example, is one of the larger staffing firms in Singapore. Earnings in 3QFY2019, dipped 4.9% y-o-y to $12 million. On a fully diluted basis, this translates into earnings per share of 1.19 cents for 3Q19, down from 1.24 cents in 3QFY2018. While its revenue increased 1.6% y-on-y to $106.7 million on higher earnings from flexible staffing matches, it was curtailed by a drop in its professional recruitment segment.
On a geographical basis, gross profit contribution from Singapore was down 4.2 percentage points to 48.9% in 3QFY2019. “For the first time, Singapore’s contribution to gross profit has fallen below the 50% mark, which while anticipated, came earlier than expected,” Adeline Sim, executive director of HRNetGroup tells The Edge Singapore.
The company has been diversifying its risks by casting its sights farther overseas. In August, for example, it bought a controlling stake of 29.95% in Staffline Group, a staffing company listed on London’s Alternative Investment Market (AIM)
The acquisition has already given HRnetGroup more visibility, Sim says, including “open[ing] up opportunities for more conversations”. And while she is still considering her options, she is happy to “strengthen [HRnetGroup’s] network further in Europe or the Americas, or further penetrate the emerging Asian economies to solidify our leadership position in the region”. This way, HRNetGroup can continue growing overall and not be dragged down by Singapore’s labour market, Sim adds.
Older retirees
Aside from higher unemployment and retrenchments, 2019 also saw the introduction of a new initiative: the extension of the retirement age. Announced by Prime Minister Lee Hsien Loong during the National Day Rally in August, the move will see retirement age increased to 65 by 2030. The re-employment age cap will consequently go up from 67 to 70, he noted.
In line with this, Melissa Kwee director of the National Volunteer Philanthropy Centre (NVPC) says employers need to acknowledge that Singapore has an ageing workforce and be more receptive towards hiring mature workers (those aged 50 and above). The unemployment rate for such workers in the labour force was 3% in 3Q2019, versus 2.7% in 2Q2019 and 2.6% in 3Q2018.
Still, Kwee believes that more needs to be done. “Gone are the days when the illiterate elder suffering poor health at 50 is the norm. Our 50 year-old today is fitter and more educated and digitally savvy with an eye on decades longer of productive contribution" says Kwee who is leading the Singapore Business Federation’s (SBF) task force on sustainable employment for mature workers. To this end, she says these individuals need to keep themselves employable by staying fit and “cultivating a positive mindset by being willing to adapt, keep learning and undergo training”.
On the flipside, the unemployment rate for persons in the labour market below 30 was high, at 6.2%. Linda Teo, Country Manager of global recruitment firm ManpowerGroup says that, aside from developing their technical knowledge, these individuals should develop soft skills to boost their employability. “Communication and problem-solving skills which are in high demand among employers, regardless of job function”, she notes adding that being adaptable and collaborative are also critical skills.
Looking ahead, ManpowerGroup’s Employment Outlook Survey expects Singapore’s job market to pick up in 1Q2020. Of the 630 employers surveyed, 13% are looking at higher payrolls next year. Five per cent forecast a decrease whereas 79% expect things to remain at status quo. This translates into a net employment outlook of +9% for 1Q2020 – five percentage points more than that for the current quarter ending December 2019. The employers surveyed come from sectors such as finance, insurance and real estate, manufacturing, mining and construction, public administration and education, services, transportation and utilities as well as wholesale and retail trade.
On a sectoral basis, the public admin and education sector is most optimistic with a net employment outlook of +22%. The finance, insurance and real estate sector followed suit with its projected outlook of +15%, while the mining and construction sector anticipates an outlook of +12%. Meanwhile, modest hiring activity is expected in the manufacturing (+3%), services (+8%) and wholesale and retail trade (+6%) sectors. This comes as these sectors have been hit by lower activity on the back of the US-China trade war that has caused a global slowdown.
The findings are in line with the Monetary Authority of Singapore’s (MAS) October 2019 edition of its Macroeconomic Review which envisions a modest pick-up in the labour market supported by demand for digital and IT services. The report also expects growth in the construction sector amid a healthy pipeline of both public and private sector projects.
