JOB SITUATION IN SINGAPORE (Assessment)

Column No : 3137

JOB SITUATION IN SINGAPORE:

(Assessment) * 8. *Mdm Halimah Yacob asked the Acting Minister for Manpower what is his assessment of the job situation in the next six months as many Singaporeans are concerned with the prospect of a jobless recovery despite all the measures that have been taken recently to lower costs and to create a more competitive business environment.

Dr Ng Eng Hen: Mr Speaker, Sir, the economic outlook for the next 12-18 months is brighter. MTI's preliminary estimate for Singapore's GDP growth in 2004 is 3-5%, and economic growth will eventually create more jobs and bring down unemployment. The advance GDP estimates for the third quarter show a positive 1.0% growth.

But employment growth is a lagging indicator, and typically lags behind GDP growth by around two quarters. Companies usually do not start hiring until they are more certain that the increased sales are sustainable. So I expect the unemployment rate to worsen this year before improving from the second half of 2004. The unemployment rate was 4.5% in June this year, and my Ministry's earlier forecast, that unemployment could move to 5.5% or higher by end of this year, is still valid and likely.

Why will the unemployment rate get worse before improving? This is partly due to the labour force participation rate (LFPR). Earlier this year, we announced that, because of SARS and the weak economic conditions, about 26,000 jobs were lost in the second quarter of this year. This was the eighth consecutive quarterly decline in employment, and the worst contraction since the mid-80s recession. But, paradoxically, the unemployment rate for residents (seasonally adjusted) in June 2003 was actually lower at 4.9%, than the 5.2% in March 2003.

Why was this so? The reason is that a higher number of people withdrew from the workforce. The economically-inactive proportion of residents rose from 34% to 37% and, therefore, were not captured in the unemployment data. Because the job market was weak, some perhaps decided to defer their job search to take a break; others went for training or further studies.

As the economy and the job situation turn for the better, we will see a flip side of what I described happened in June this year. The preliminary data for July this year show gains of over 8,000 new jobs. This was a notable gain after three consecutive months of job losses, and was twice that compared to a year ago. But because more jobs are available, more will resume their job search after the poor economic situation caused by SARS. In other words, they are coming out of the economically inactive pool and will expand that pool. In addition, a new batch of graduates from university, polytechnic and ITE also join the workforce annually at this time, adding to the pool of job seekers. So, as a result, I expect the labour force participation rate to rise, as well as the unemployment rate initially.

As the economic situation improves, more new jobs will be created and employment and re-employment will increase, and unemployment will go down.