Singapore’s labour market is reeling from the effects of the Covid-19 health-turned-economic crisis, as total employment plummeted by 121,800 in June 2020. This more than four times the 25,600 contraction registered in March, according to preliminary numbers released by the Ministry of Manpower (MOM) in its Labour Market Report on July 29.
See: Total employment makes historic drop in 1Q20 as ratio of job vacancies to unemployed persons falls
The latest data marks Singapore’s largest quarterly contraction on record since the SARS pandemic which saw hiring dip by 24,000 in June 2003.
It follows contractions across the three broad sectors of manufacturing, services and construction, the MOM notes. Within the services cluster, declines were sharpest for food and beverage services, retail trade, arts, entertainment and recreation and education, following restrictions on their patronage during the circuit breaker measures and phase one of Singapore’s re-opening.
Meanwhile, the construction sector was also deeply hit, following the stay home notices and quarantine orders imposed on migrant workers who account for a sizable percentage of the sector’s workforce.
In comparison, employment contraction for the manufacturing sector was more modest, MOM observes.
Singapore’s seasonally-adjusted unemployment rate edged up to 2.9% in June, worse than the 2.4% it was at in March. Unemployment among both residents and citizens rose – with the jobless rate for residents inching to 3.9% from 3.3% in March.
Meanwhile, citizen unemployment rate came in at 4.0% from the 3.5% it was at in March.
Overall, there were 90,500 unemployed residents in June, of whom 79,600 or some 88% were citizens.
At this level, the jobless rate remains lower than previous recessionary peaks during the Global Financial Crisis (GFC) and SARS, MOM’s report details.
At the height of the GFC in September 2009, unemployment rate was 3.3%; the percentage of unemployment for both residents and citizens came in at 4.9%.
Jobless rate was higher at 4.8% during SARS in September 2003. Resident unemployment stood at 6.2% while that for citizens was 6.4%.
Aside from this, retrenchments for June hit 6,700, more than double the previous quarter’s 3,220.
“While retrenchments have now surpassed the high during SARS (2Q2003: 5,510), it remained below the peak observed in the Global Financial Crisis (1Q2009: 12,760),” MOM observes.
Retrenchments were seen across the three sectors, with higher layoffs seen in wholesale trade and transport equipment following reduced demand in retail and air travel.
Conditions for travel-related sectors remain challenging as the external economic environment remains challenging and some countries are experiencing a second wave of Covid-19 infections.
Other sectors are also experiencing moderate recovery, following the imposition of Covid-safe management measures.
To this end, MOM cautions that softness in the labour market is likely to persist with continued weakness in hiring and pressure on companies to retrench.
To mitigate this, the government has been ramping up its job support measures. These include the Jobs Support Scheme (JSS) introduced during Singapore’s four budgets, that aim to tide employers through this crisis.
It is also offering attachments and training opportunities to enable job seekers gain industry-relevant skills that will lead them to a more permanent role once the crisis abates.
Still, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye note that – together with the 26,000 job losses in Singapore – total employment has contracted by 148,000 in 1H2020. This follows a “services recession”, as heavy job losses were seen in the sector as businesses were forced to shutter during the “circuit breaker” measures, the duo say.
They now expect job losses to hit 180,000 to 220,000 this year – up from their previous 100,000 to 150,000 estimate. While there is no breakdown in the employment losses by citizenship type, Chua and Lee estimate that foreigners accounted for as much as 80% of those retrenched.
“Locals could account for a larger proportion of the layoffs in the second half, as the job support schemes and wage subsidies expire in August,” they add.
As such, they are looking at the overall unemployment rate climbing to a peak of around 4% to 4.5% in 2H2020.
Agreeing, UOB economist Barnabas Gan unemployment to hit a more modest 3.5% in 2H2020. “Headwinds in the tourism-related sector, external environment, and resurgence in COVID-19 infections across Singapore’s key trading partners may lead overall economic growth lower,” says Gan.
“Given the slowdown, companies may continue to show reluctance in hiring while the pressure to retrench their existing workforce could also increase”.
To mitigate this, Chua and Lee say some support measures would need extensions from the October cut-off date. These measures include the final tranche of the Jobs Support Scheme (estimated at $5 billion), Workfare Special Payment ($600 million) and Self-Employed Person Income Relief Scheme ($360 million).
If need be, the duo say the government can roll out a fifth budget based on the $13 billion Contingency Fund set aside in the fourth Fortitude Budget. This fund allows for fiscal support without having to draw down on reserves.