Published March 17, 2009

COMMENTARY
Bright spots in job market gloom

Record quarterly job loss in Q4 may not point to worse to come

By CHUANG PECK MING
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WE HAVE been primed to expect big job losses ahead. The slump in the global economy, the worst since the Great Depression, has been spreading alarmingly high unemployment from the United States to Europe and Latin America - and they are heading our way, towards Asia. It's a matter of time we get hit.

Closer home, our ministers and labour leaders have already sounded the alarm, alerting us to large layoffs in the unionised industries and preparing us for worse to come.

Still, the job losses reported yesterday by the Manpower Ministry may come as a surprise to at least some of us. The blow came early and bigger than we thought - in fact, it had arrived while we were still looking out for it.

We were already hit with a quarterly record loss of 9,410 jobs in the final quarter of last year - almost three times the redundancies in the previous quarter.

With still no sign of the global recession bottoming - in fact, we are treated to even more dire forecasts for our economy - the big question now is will there be even bigger job cuts in the coming months?

Caught in the current gloom, it's easy for us to say the worse is yet to come. But there are also reasoned views to be downbeat.

Economist Song Seng Wun from CIMB-GK sees the job cuts in the fourth quarter as only 'the first round' of many to come. And it affected mainly foreign and contract workers, who were the smaller group in the workforce.



He says the next round of cuts will be on the 'permanent' staff who make up the bigger group.

What's more, the job losses in the fourth quarter were mostly - more than half the total - manufacturing jobs. He thinks the axe will next come down more on service workers, who are more numerous.

Citigroup economist Kit Wei Zheng adds that employers have built up excess labour during the good times - and there are still excess fat to be cut in the year ahead, even with the government's Jobs Credit and other jobs saving schemes in place.

Mr Kit has a point. Labour productivity has already taken a beating, falling 12 per cent in the fourth quarter - a sharper fall than in the third quarter, when it declined 9 per cent.

But labour productivity was also dragged down by the contraction of output because of lower global demand - not just excess workers.

And while Mr Kit gives credit to Jobs Credit, saying that without it things would be even much worse, his 'gut feeling' is it may still not be enough to stem the tide of huge layoffs.

Even the government has no full confidence that the $4.5 billion Jobs Credit scheme could ease the employment condition altogether.

Rescue packages

Yet, it should be noted that when employers were cutting jobs in record numbers in the fourth quarter last year, Jobs Credit was still under wraps - and the rescue packages in the United States and China had not kicked in.

After Jobs Credit was unveiled, some small firms - as Mr Kit notes - were so impressed by its generosity that they even turned to hiring more staff, not just retained existing workers, to enjoy the cash grant.

Of course, schemes like Jobs Credit can only buy time. But this does not necessarily mean delaying the inevitable job cut. It can still help employers to prolong employment until global demand picks up - and workers can really get back to work again.

This is especially so with manufacturing workers who produce for the world markets. The bigger pool of service workers are less dependent on external demand, which we can't do much about.

Which also brings us back to Mr Song's concern that the next round of job cuts will focus on services workers, leading to even bigger losses. This worry may not come to pass. Service workers' fates are tied more to the home market - which we can have at least some control - than the world market.

Labour movement leader Lim Swee Say has made it his priority to keep this year's retrenchment to at least below the 1998 record high of 29,000. If he succeeds, there's a good chance that job losses are not going to get worse than the fourth quarter's number of 9,410.

Quarterly job losses will have to be lower than that number for the annual losses to stay under 29,000.