Singapore Labor Market on Track to Outperform But Uncertainties Lie Ahead

Singapore Labor Market on Track to Outperform But Uncertainties Lie Ahead
Source: MarketWatch

SINGAPORE--Singapore's labor market is on track to outperform this year as employment and wages keep growing in line with an expanding economy and cooling inflation, the Ministry of Manpower said in a report.

The labor market extended its run of growth in the third quarter, with total employment, excluding migrant domestic workers, nearly doubling from the prior quarter. That was driven by increases in both resident and non-resident employment.

Unemployment continued to decline over the quarter, while the number of retrenchments also stayed low. Singapore's overall unemployment rate stood at 1.9% in September.

Although labor demand pulled back as job vacancies fell, the labor market stayed tight with more job openings than unemployed persons.

"In the longer run, however, employment growth among Singaporean residents is likely to moderate in part due to slowing workforce," the report said.

That underlines the economic pressures the city-state faces from demographic issues including an aging population and low fertility rates.

"Complementing the local workforce with skilled foreign labor is essential to maintaining Singapore's economic competitiveness and growth, and create more opportunities for locals," the ministry said.

Looking ahead, the ministry expects the labor market to stay tight but that it could loosen gradually as more job vacancies are filled, normalizing to pre-pandemic levels.

"Economists will be watching to see how labor market conditions develop next year," OCBC chief economist Selena Ling said. "Given brewing external headwinds from factors like U.S.-China tensions, many employers could take a wait-and-see approach to hiring."
"While they are unlikely to step up layoffs, employers may exercise caution in hiring and wage/bonus intentions until there's greater clarity on the economic-business landscape," she added.
If "the labor market stays tight in the first half of 2025," that could potentially delay monetary policy easing by MAS (Monetary Authority of Singapore) to later part of year," Ling noted further.
A looser labor market "could curb labor unit cost growth" which has cooled considerably according DBS economist Chua Han Teng. Lower costs can indicate lower inflation."
A slower pass-through business costs consumer prices one factors supporting DBS expectations average core inflation moderate 1.8% 2025 from 2.7% 2024
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