Singapore's jobless rate declines to 3.4% in 3rd qtr

Asian Economic News, Dec 20, 2004

SINGAPORE, Dec. 16 Kyodo

Singapore's jobless rate improved in the third quarter to 3.4 percent -- the lowest in three years -- helped by the country's strong economic rebound, the Manpower Ministry said Thursday.

The fall from 4.5 percent in the second quarter brings the unemployment rate to around the level in 1999 when the economy started recovering from the 1997 Asian financial crisis, the ministry said in its latest quarterly report.

However, the jobless rate still remains above the 2 percent rate which Singapore enjoyed before the onslaught of the crisis, it said.

The ministry attributed the better data to recovery in the job market due to the robust economic growth in the first half of this year. ''Employment saw its longest sustained period of expansion, outlasted only by the recovery from the Asian crisis,'' it said.

However, it warned that structural unemployment, which refers to a situation where workers lack the relevant skills to take up newly created jobs, will continue to be a bugbear in the economy.

''Structural unemployment remains a concern as businesses continue to restructure and evolve, driven by advances in IT connectivity and rising competition'' with fast-rising economies such as China and India, it said.

It said that even though the year-end festive season will continue to boost job prospects, ''the underlying growth momentum is expected to ease as the Singapore economy transits to a slower rate of growth amidst the anticipated slowdown in global IT demand and weaker growth in the world economy.''

Manpower Minister Ng Eng Hen said last month that the unemployment rate is likely to end the year at 4 percent or less, while Lim Boon Heng, secretary general of Singapore's umbrella trade union, the National Trades Union Congress, has projected that the rate may settle at 3 percent.

The Monetary Authority of Singapore, the country's central bank, predicted in October this year that Singapore's natural unemployment rate would range between 3 percent and 3.5 percent.

Recent reports in local dailies say that the prevailing view is for companies to raise wages for existing workers rather than hire new recruits. Despite the high jobless rate in recent years, the government has continued to pursue a policy of opening its doors to foreign workers, such as software engineers from India and construction engineers from China, much to the chagrin of local workers who fear that foreigners may threaten their jobs.

Singapore's gross domestic product grew a strong 7.5 percent and 12.5 percent in the first and second quarters of this year, respectively, on a year-on-year basis, and 11.1 percent and 11.9 percent respectively on an annualized quarter-on-quarter basis. However, growth slowed down in the third quarter, shrinking 3 percent quarter on quarter.

The third-quarter slowdown has prompted the Trade and Industry Ministry to revise downward last month its projection for this year's full-year growth to between 8.0 and 8.5 percent from the higher range of 8-9 percent forecast earlier.