Statement on Labour Market Developments

Introduction

1. The labour market continued to improve in 1H 2018: total employment grew, more job vacancies were available, and retrenchments declined. The resident unemployment rate was lower than a year ago, although it rose slightly in 2Q 2018 as more persons entered the labour force looking for work, in line with the pick-up in economic activities.
   
   Review of 1H 2018
   
   Employment
2. Total employment (excluding Foreign Domestic Workers (FDW)) grew by 6,900 in 1H 2018, compared with a decline of 17,300 in 1H 2017, and a growth of 6,700 in 2H 2017.
   
   Local employment grew
3. Local employment growth in 1H 2018 (+6,500) was more than 1.5 times the year before (1H 2017: +4,000). Growth occurred mainly in the Community, Social & Personal Services, Financial & Insurance Services, Information & Communications, and Transportation & Storage sectors.
   
   
   
   Foreign employment grew slightly
4. Foreign employment (excluding FDW) grew slightly by 400 in 1H 2018, compared with the decline in 1H 2017 (-21,400) (Figure 1). This was due to the moderated decline in the Construction sector (-5,400 in 1H 2018, compared to -20,400 in 1H 2017), and stronger growth in the Services sector (+8,200 in 1H 2018, compared to +5,200 in 1H 2017).
5. Employment of Employment Pass (EP) holders fell (-3,400) as a result of the raising of the EP qualifying salary in January 2017. At the same time, the number of S Pass Holders continued to increase (+5,300) since 2H 2017.
   
   Resident unemployment rate rose slightly as more entered the labour force to look for work
6. The seasonally-adjusted resident unemployment rate rose from 2.8% in March 2018 to 2.9% in June 2018 after a general downtrend since June 2017, but remained slightly lower than the same period a year ago (3.1%).¹ This occurred as more persons entered the labour force to look for work. At the same time, the seasonally-adjusted resident long-term unemployment rate edged up from 0.7% in March 2018 to 0.8% in June 2018, but remained within the range observed in the last two years.
   
   Retrenchments and Job Vacancies²
   
   Retrenchments continued to decline
7. Retrenchments declined to 5,350 in 1H 2018, which was lower than in 1H 2017 (7,640). Restructuring and reorganisation remained the top reasons for retrenchment across industries.
8. At the same time, the six-month re-entry rate into employment of retrenched residents was about two-thirds (63%) in 1H 2018³, comparable to that in 1H 2017 (64%).
   
   Ratio of job vacancies to unemployed persons continued to improve
9. Job vacancies rose to a 3-year high of 56,700 in June 2018, an increase from 53,900 in March 2018. As the increase in unemployed persons was relatively smaller, the seasonally-adjusted job vacancies to unemployed persons ratio further improved to 1.08 in June 2018, up from 1.04 in March 2018 and 0.92 in December 2017.
   
   Productivity
   
   Labour productivity grew
10. Overall labour productivity (as measured by real value-added (VA) per worker) rose by 3.9% in 1H 2018 over the same period last year. This was higher than the 2.8% growth in 1H 2017 but lower than the 4.8% growth in 2H 2017 (Figure 2). Productivity growth in 1H 2018 was supported by the Manufacturing, Financial & Insurance Services, Accommodation & Food Services, and Wholesale & Retail Trade sectors. On the other hand, productivity declined in the Transportation & Storage and Community, Social & Personal Services sectors.
    
    
    
    Sectoral Performance and Outlook
    
    Manufacturing
11. Employment in the Manufacturing sector fell by 3,900 in 1H 2018, following declines in 1H 2017 (-6,400) and 2H 2017 (-4,500). The decline was due to a decrease in Work Permit Holders in the Marine Shipyard sector, which continued to be weighed down by subdued demand for new-build oil rigs. Excluding the Marine Shipyard segment, employment in the Manufacturing sector grew by 1,000 in 1H 2018. On the back of healthy VA growth, productivity in the Manufacturing sector rose by 12.7% on a year-on-year (YoY) basis in 1H 2018, extending the 12.2% growth in 1H 2017 and 15.0% growth in 2H 2017 (Figure 3).
    
    
12. Manufacturing Outlook. Employment outlook in Manufacturing (excluding Marine Shipyard) is expected to be subdued in 2H 2018. The Marine Shipyard segment is likely to continue to see negative employment growth, due to weak demand conditions faced by local yards and firms producing oilfield and gasfield equipment.
    
    Construction
13. Employment in the Construction sector contracted by 6,400 in 1H 2018, a smaller decline compared to 1H 2017 (-23,100) and 2H 2017 (-15,300). The decline came amid continued weakness in construction activity with the decrease mainly from Work Permit Holders. Despite the continued contraction in Construction VA, productivity increased by 1.2% on a YoY basis in 1H 2018, compared to a decline of 4.3% in 1H 2017 and a growth of 0.8% in 2H 2017 (Figure 4).
    
    
14. Construction Outlook. The performance of the construction sector is likely to stay lacklustre for the rest of the year, given the earlier weakness in contracts awarded. The continued weakness in Construction activity is likely to weigh on employment in the sector.
    
    Services
15. Unlike the Manufacturing and Construction sectors, the Services sector saw employment growth in 1H 2018. Total employment (excluding FDW) in the Services sector grew by 17,100 in 1H 2018, higher than in 1H 2017 (12,100) but lower than in 2H 2017 (26,900). Employment declined in sectors such as Accommodation & Food Services, and Wholesale & Retail Trade, on the back of an uneven performance in the various sub-segments of the sectors. The declines were more than offset by employment gains in the Community, Social and Personal Services, Information & Communications, Financial & Insurance Services, Administrative & Support Services, and Transportation & Storage sectors.
16. Productivity in the Services sector grew by 1.4% on a YoY basis in 1H 2018, following a 0.5% growth in 1H 2017 and 1.8% growth in 2H 2017 (Figure 5). The productivity declines in the Community, Social & Personal Services, and Transportation & Storage sectors were more than offset by increases in the Accommodation & Food Services, Business Services, Financial & Insurance Services, Information & Communications and Wholesale & Retail Trade sectors.
    
    
17. Services Outlook. External demand is expected to remain firm in 2H 2018, and this will support employment growth in externally-oriented services sectors such as Financial & Insurance Services and Transportation & Storage. At the same time, growth in the domestically-oriented services sectors such as Food & Beverages Services and Retail Trade sectors is likely to be supported by a pick-up in hiring in 2H 2018 due to the year-end festive season. Sectors such as Community, Social & Personal Services, particularly the Health & Social Services segment, should continue to see increases in hiring.
    
    Labour Market Outlook
18. The Ministry of Trade and Industry (MTI) has maintained the 2018 growth forecast for the Singapore economy at 2.5 – 3.5%, with the pace of expansion expected to moderate in 2H 2018 as compared to 1H 2018. Against this backdrop, MOM expects labour demand to pick up in 2H 2018, in line with seasonal hiring as seen in previous years. Hiring is expected to remain cautious in sectors such as Construction and Marine Shipyard, while job opportunities will continue to be available in others such as the Information & Communications, Financial & Insurance Services, Healthcare, Professional Services, Wholesale Trade, and Built Environment sectors.
19. In the medium term, labour supply will remain tight. Local workforce growth will remain modest due to underlying demographics trends, while foreign workforce growth will continue to be moderated.
    
    Conclusion
20. The labour market continued to improve in 1H 2018. As restructuring picks up pace amidst increased economic activity, jobs and skills mismatches will continue to be a challenge. It will therefore be increasingly important for workers and businesses to stay agile and responsive to economic transformation and an evolving workforce landscape.
21. MOM and Workforce Singapore (WSG) will work closely with unions, companies, and economic agencies to press on with efforts that will prepare workers and businesses for changes in the economy and labour market. For example, more Professional Conversion Programmes, which equip workers for new roles and functions, will retrain workers even before they are displaced, in addition to helping unemployed jobseekers. Businesses can also tap on support under the Lean Enterprise Development Scheme and Capability Transfer Programme to prepare for economic transformation.