What Singapore's slowing GDP growth means for the jobs market

SINGAPORE: As Singapore’s outlook darkens with growth cooling to levels last seen a decade ago, there could be more retrenchments and fewer job vacancies ahead, said economists.

The job losses will likely come from outward-oriented sectors, which have been hit by a protracted trade spat between the United States and China.

Already for the first quarter, data from the Ministry of Manpower (MOM) showed an increase in retrenchments – from 2,510 in the previous quarter to 3,230 – on the back of a near three-fold jump in job losses in the manufacturing sector.

The economy grew 1.1 per cent year-on-year during the first quarter but amid falling factory activity and exports, growth in the second quarter slowed sharply to a decade-low 0.1 per cent on a year-on-year basis based on recent flash estimates.

DBS senior economist Irvin Seah said it is “pretty clear that the outlook for the labour market isn’t going to be great” given the “drastic” growth slowdown. “You can only expect retrenchments to pick up and job vacancies to decline in the coming quarters.”

Manufacturing will continue to shed jobs in the coming quarters, with the unpredictable trade spat coinciding with a fading global electronics cycle, experts said.

“The downturn in the electronics cluster has resulted in cutbacks in electronics sector jobs, which is expected to continue during the second half of 2019,” said Mr Rajiv Biswas, chief economist for Asia Pacific at data firm IHS Markit.

The manufacturing sector, which accounts for one-fifth of the economy, is also seeing old jobs being made obsolete by automation, added Mr Seah.

Beyond manufacturing, economists are also keeping a cautious eye on the outward-oriented services sectors.

While electronics accounted for 18 per cent of the retrenchments in the first quarter, services industries such as wholesale trade and transportation and storage followed close behind with 16 and 10 per cent, respectively, MOM’s labour report showed.

While domestic services segments can offer support, they make up relatively smaller shares of growth and “may not be enough to offset the receding tide”, said Mr Seah, referring to the sector’s 1.5 per cent quarter-on-quarter dip in the second quarter on a seasonally adjusted basis.

Further weakness in services is “the bigger worry”, added the economist, given how the sector accounts for about two-thirds of the economy and employment, although the tightening of foreign manpower quotas from January 2020 may mitigate the fallout on this front.

Meanwhile, “undercurrents” like the recent job cuts at German banking giant Deutsche Bank will add to the retrenchment figure in the third quarter, said CIMB private banking economist Song Seng Wun.

“UNEVEN” LABOUR MARKET

Still, even as prospects are set to sour in certain sectors and translate into higher layoffs, some economists were quick to add that job opportunities remain.

Mr Song pointed to sectors that have remained resilient thus far, such as modern services on the back of a Government-led push in digitalisation.

“We now have a strange landscape where headline growth numbers look quite discouraging but underneath, there are pockets of strength,” he said.

“This will be reflected in terms of how retrenchments will continue to edge up, reflecting the moderation in external demand, yet growth in certain pockets will continue to create jobs.”

Likewise, Mr Biswas said the structure of employment growth by sectors will remain “very uneven”, with positive growth in “new economy jobs”.

These include infocomm technology, buoyed by a digital revolution and industrial automation, as well as enhanced cybersecurity needs. Financial services is also benefiting from Singapore’s role as a leading hub for segments such as asset management, financial technology and insurance.

Manpower Minister Josephine Teo, in a Facebook post after the release of dismal second-quarter flash estimates on Jul 12, noted that there are still 60,000 unfilled vacancies despite the growth slowdown.

About half of them are for professionals, managers, executives and technicians (PMETs) in sectors like financial services and professional services.

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