SINGAPORE, June 14 — More workers were retrenched in the first quarter of this year compared to the previous quarter and a year ago, the Ministry of Manpower (MOM) said in a report released yesterday.
The increase was driven by manufacturing and affected workers in production and electronics, the ministry’s latest labour report said.
And after seven consecutive quarters — or close to two years — of increases, the number of job vacancies declined in the first quarter of this year, from 62,300 last December to 57,100 in March this year.
Here are the key findings from the report:
- As of the first quarter of this year, 3,230 workers were retrenched. This was higher than the quarter before (2,510 workers) and a year ago (2,320).
- Top reason for retrenchments: Business restructuring and reorganisation. But the report also said that high costs and a downturn in the market have led to the higher layoffs.
- Electronics formed 18 per cent of the retrenchments, followed by the services industries such as wholesale trade at 16 per cent, and the transportation and storage sectors at 10 per cent.
- Among those retrenched, professionals, managers, executives and technicians (PMETs) continued to form the majority at 69 per cent. They are “more prone” to layoffs since they make up a larger share of the workforce.
What this means: Economists pointed out that the escalating trade war between the United States and China has hit the manufacturing sector head on. It does not help that Singapore’s electronics cluster has been on a downcycle in the past year and is already in the “contraction” territory.
So, to reduce costs, companies have to trim headcount, they added.
Senior economist Irvin Seah with DBS bank also noted that the push to get manufacturing companies to leverage technology to automate processes has indirectly resulted in layoffs simply because they do not need manpower.
Maybank Kim Eng’s economist Chua Hak Bin said that the trade war has hit the electronics supply chains, especially those that rely heavily on China’s market. And this disruption will likely worsen in the coming months as the US’ export controls for suppliers to China’s technology companies will add another layer of disruption.
Job vacancies declined
- Demand for labour has risen from 46,900 in March 2017 to 62,300 last December. But the trend came to a halt as it dipped in the first quarter of this year.
- Still, there continued to be more vacancies than job seekers, although the seasonally adjusted ratio of job vacancies to unemployed persons dipped slightly from 1.10 last December to 1.08 in March this year, the report said.
- Job vacancies for PMETs formed the bulk of the increase, with this coming from sectors such as financial, professional as well as community and social services.
- As of March this year, about three in five or 57 per cent of job openings were PMET positions. The remaining vacancies were for clerical, sales and service workers as well as production and related workers.
What this means: Seah from DBS said that the rise in retrenchment, coupled with the easing demand for labour signals one thing — the start of a downcycle in the labour market, which he expects to worsen in the coming months unless there is respite in the economy.
When the labour market is in a downcycle, PMETs will be the hardest hit as they form the bulk of the labour sector, he added. Lower-skilled workers will be spared in such a scenario since the Government has tightened the inflow of migrant workers over the years.
“There are safeguards for lower-skilled workers, but not so much for PMETs,” Seah said.
Saying that there is a likelihood of slow employment growth, Chua pointed out that stricter dependency ratio ceilings for the services sector from 2020 could dampen labour demand in areas such as retail trade, hospitality as well as food and beverage.
Song Seng Wun, an economist with CIMB Private Banking, said that though the latest survey by the Monetary Authority of Singapore (MAS) shows economists downgrading Singapore’s 2019 growth forecast — it is to increase by 2.1 per cent this year, a slower pace than the 2.5 per cent growth forecast in the March survey — it still indicates a possible soft growth in the second half of this year.
But if the trade war worsens, the possibility of a soft growth might “fail to materialise”. “Then the labour market will soften further. Demand for labour will continue to ease,” he added.
Total employment growing
- Driven primarily by the services sector, total employment continued to grow by 10,700 in the first quarter of this year, with the figure higher than the same quarter last year. This figure excludes foreign domestic workers.
- For the first time in three years, employment in construction rose slightly by 200, with MOM attributing it to the increase in public- and private-sector construction activities.
- In contrast, the job market in manufacturing continued to take a beating as employment declined for the second consecutive quarter led by cutbacks in electronics.
- And gloomier news for the electronics cluster — it posted its largest employment contraction in six years, amid a rise in retrenchments in the first quarter this year, from 80 to 600. The outlook is likely to remain subdued, MOM said, as companies are projecting lower levels of production.
- When it comes to unemployment, the seasonally adjusted resident long-term unemployment rate — referring to the number of people unemployed for at least 25 weeks — dipped slightly from 0.8 per cent last December to 0.7 per cent in March this year.
What economists say of job market outlook
Irvin Seah (DBS): “There will definitely be a slowdown in employment in the near term. The labour market outlook very much depends on the outcome of the trade war. For the Singapore Government, it already provides support to those retrenched but it needs to be prepared to step up its efforts.”
Chua Hak Bin (Maybank Kim Eng): “Companies will be more cautious about hiring for the rest of the year, given the escalating US-China trade war. Employment growth will likely slow, while manufacturing employment will likely remain in contraction for the rest of the year.”
Song Seng Wun (CIMB): “Slower employment growth is likely and companies will be more selective when it comes to hiring. For domestic-oriented services relating to social services, IT security or e-payments, there could be a modest labour demand. But for those highly dependent on trade, they will find it more challenging to make jobs available.” — TODAY