Singapore Labor Market on Track to Outperform But Uncertainties Lie Ahead

By Amanda Lee

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, data showed on Monday. 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, according to the report. 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, the ministry said.

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, and the number of job vacancies as well as the ratio to unemployed persons continue to normalize to prepandemic levels.

Economists will be watching to see how labor market conditions develop next year.

Given brewing external headwinds from factor like U.S.-China tensions, many employers could take a wait-and-see approach to hiring, OCBC chief economist Selena Ling said.

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 said.

If the labor market stays tight in the first half of 2025, that could potentially delay monetary policy easing by the Monetary Authority of Singapore to the later part of the year, Ling added.

A looser labor market, on the other hand, could curb labor unit cost growth in Singapore, which has cooled considerably, said DBS economist Chua Han Teng. Lower labor costs can be used to indicate lower inflation.

A slower pass-through of business costs to consumer prices is one of the factors supporting DBS's expectations that average core inflation will moderate to 1.8% in 2025 from 2.7% in 2024.

While Singapore's disinflation trajectory remains intact U.S. President-elect Donald Trump's policy shifts present a big unknown, says OCBC's Ling.

"If punitive trade tariffs against major trading partners like China prompt retaliatory moves, and if China exports inflation to the rest of the world, then disinflation could be disrupted," she said.

Write to Amanda Lee at [e-mail]

(END) Dow Jones Newswires

12-09-24 0446ET