Unemployment may hit 20-year high of 5% by middle of 2010: Economist
MORE than 99,000 jobs could be lost by next year as Singapore's worst recession takes its toll on workers, according to a new prediction by DBS Bank.
Its Singapore economist, Mr Irvin Seah, said the worsening downturn would inflict more pain on employees than what they suffered in the Asian financial crisis of 1998, the 2001 dot.com bust and the Sars outbreak in 2003.
He expects unemployment to rise above 4 per cent in the second half of this year and touch a 20-year high of 5 per cent by the middle of next year.
Unemployment rose to 2.6 per cent at the end of last year.
But Mr Seah said yesterday that his figures did not take into account the recent measures implemented by the Government to try to save jobs, such as the Jobs Credit scheme and the Skills Programme for Upgrading and Resilience (Spur).
'We cannot quantify the reactions of individual employers to the government policies,' he added.
Still, he estimates the job-saving measures could prevent only between 10 per cent and 20 per cent of the net 99,104 job losses he predicts, which will affect both Singaporeans and foreigners.
The Budget measures 'are not designed to help comatose companies survive the onslaught of this recession', he said. Struggling firms will need to slash costs or be forced to wind down.
'As a result, high unemployment and more job losses will be inevitable, and the going will get tougher as the worst of the labour market cycle is yet to come.'
Mr Seah said he made his predictions partly to counter the 'overly pessimistic' layoff numbers being put out by some other banks.
A flurry of job loss predictions have surfaced recently as economists try to gauge the impact on jobs of Singapore's worst slump since gaining independence.
Credit Suisse, for instance, made headlines last month by predicting that a massive 300,000 jobs could be lost by the end of next year - a third from Singaporeans and the remainder from foreigners.
After the Budget was announced, the bank said the measures would save 60,000 jobs for Singaporeans but none for foreigners.
Citigroup economist Kit Wei Zheng recently forecast net job losses of 34,000 this year, exceeding the 20,000 to 25,000 lost in the recession years of 1998 and 2001. He said unemployment would likely average 4.2 per cent this year but ease to 3.7 per cent next year.
Barclays Capital's Leong Wai Ho is also predicting more than 30,000 retrenchments, but he said it was important to put the job loss numbers in perspective.
While a figure like 99,000 layoffs may 'conjure images of devastation at first glance, at closer inspection, this rate of decay is normal for adverse cycles of this nature and an economy of this size'.
In the last downturn of 2002 and 2003, the economy shed 79,000 jobs, or 3.9 per cent of the labour force. In equivalent terms today, that would be 106,000 jobs lost, Mr Leong said.
In fact, he expects less pain this time around because of the 'number of cushioners' today, including training schemes such as Spur.
In the meantime, the layoffs are mounting.
On Tuesday night, the National Trades Union Congress said it expects 4,300 unionised workers to be laid off in the first three months of the year, up from a previous estimate of 3,700. The bulk of these retrenchments will come from the electronics sector.
Since the end of last year, Singapore's exports have been in free fall and manufacturing output has dropped off a cliff. Prime Minister Lee Hsien Loong said on Sunday that the economy may do even worse this year than the official worst-case scenario of a 5 per cent contraction.
Mr Seah's own forecast is for the economy to shrink by 4.8 per cent this year.
Each industry reacts differently to the downturn, he said. In manufacturing, which will bear the brunt of the layoffs, an expected 10.2 per cent contraction in the sector will lead to almost 58,000 jobs lost.
Mr Seah also expects more than 69,000 people in logistics and trade services to be laid off, while retrenchments in the financial industry could exceed 16,700. Still hiring are the construction sector - although that will benefit mainly foreign workers - as well as health care, education and business services.
Source: Straits Times, 26 Feb 2009