MAS expects more job losses and fewer pay rises as recession looms
The Monetary Authority of Singapore (MAS) expects increasing job losses and fewer pay rises this year as the economy heads into its worst recession on record.
The central bank said the job market will worsen amid a sharp drop in both economic activity and demand for goods and services at home and abroad.
"The resident unemployment rate is expected to rise and wage growth ease," MAS said in its monetary policy statement yesterday.
"A degree of labour market slack could emerge as firms pull back on their hiring plans, even as the scale of retrenchments is mitigated by the Jobs Support Scheme," it said.
MAS noted the "economy will enter a recession" and will shrink by 1 per cent to 4 per cent this year.
In the fourth quarter of last year, the seasonally adjusted unemployment rate had risen to 2.3 per cent, up from 2.1 per cent in the last three months of 2018.
Unemployment among Singaporean citizens was even higher at 3.3 per cent, up from 3 per cent in the same quarter of 2018.
Retrenchments had also crept up in the fourth quarter of last year to 2,700 people, compared with 2,470 in the third quarter of 2019.
Even more troubling is the fact that the job vacancy to unemployment ratio has stayed below 1.0 since the second quarter of last year - suggesting there were more unemployed people than vacancies available.
United Overseas Bank economist Barnabas Gan, in a research note yesterday, compared the current labour market trends to previous periods of crisis and noted that unemployment rates had risen then despite government intervention.
Singapore's unemployment rate increased to 4.8 per cent in the third quarter of 2003 during the severe acute respiratory syndrome (Sars) outbreak, up from 3.6 per cent the previous year.
Similarly, during the global financial crisis (GFC), the unemployment rate rose to 3.3 per cent in the third quarter of 2009, up from 2.3 per cent in the second quarter, despite the introduction of the $20.5 billion Resilience Package then.
"Coupled with the initial stress seen in Singapore's labour market prior to the Covid-19 outbreak, the pandemic will likely further weaken Singapore's labour market in 2020," Mr Gan said.
"As such, we pencil Singapore's unemployment rate to rise to 3.5 per cent in 2020, similar to the impact seen during Sars and GFC."
However, Mr Gan pointed out, the level of government support announced this time around - a total of $55 billion - is more than twice the level of support given during the GFC and should help mitigate some of the negative impact of the crisis. - OVAIS SUBHANI