Unexpected fall in Singapore's employment rate

Singapore's employment unexpectedly fell in Q1, according to data released yesterday, led by the manufacturing and construction sectors. Total employment fell 6.1k, the first fall since Q2 09, with manufacturing declining 6.9k and construction falling 3.6k. 

On a seasonally adjusted basis, the total fall in employment was more modest, at 0.7k (manufacturing: -5.1k; construction: -2.5k). Growth in services employment slowed sharply, due largely to a drop in property market transactions. While the sudden change in Q1 came as a surprise, there was no significant increase in retrenchments and redundancies in the quarter, and the unemployment rate actually fell to 1.8% from 1.9% in Q4, which suggests that the drop in employment was due primarily to a fall in labour force participation, alongside some industry-specific restructuring, notes Barclays.

The fall in employment shows that business are likely starting to take heed of the government's productivity drive, with Budget 2015 confirming once more there would be no rolling back in the policy to curb the low-skill foreign worker segment, according to Barclays. As a result, growth in Singapore's non-resident populatioin slowed to a 10-year low of 2.9% in 2014, down from an average of 7.7% in the 10 years prior. 

There is genuine tightness in the labour market now, aside from the fall in unemployment, vacancies are high and rising, while participation in 2014 was at a four-decade record of 67%. This is expected to lower employment last year, but this appears to have been back-loaded in Q1 15, adds Barclays.