SINGAPORE'S employment in the first quarter of 2020 performed worse than expected, registering the largest quarterly contraction in total employment on record due to the pandemic, and analysts believe the labour market could weaken further in the second quarter.
Total employment shrank by 25,600 in Q1, according to the Ministry of Manpower (MOM) on Monday. This is higher than the 19,000 cited in the ministry's preliminary data released on April 29. It also exceeds the 24,000 contraction seen in Q2 2003 during the peak of the severe acute respiratory syndrome (Sars) outbreak.
MOM attributed Q1's contraction to a "significant fall" in foreign employment. Local employment also contracted "slightly" due to sharper-than-expected declines in trade and tourism-related sectors, MOM said, although the ministry previously estimated it to have grown at a modest pace based on advanced estimates.
Explaining the discrepancy between the preliminary data and final data to reporters in a virtual briefing, Manpower Minister Josephine Teo said: "When we produce preliminary findings, they usually come out less than a month after the quarter has ended.
"All of the data points we have come from an earlier part of the quarter. So in this instance, more of the data would have come from the January and February timeframe, whereas the impact was more deeply felt in March but probably did not get reflected as much in the preliminary findings."
On Monday, the Straits Times Index closed 2.64 per cent lower at 2613.88 on the bleak labour outlook, joining the sea of red across Asian markets spooked by fears of a second wave of virus spread.
Economists were however unsurprised by the worse showing in MOM's latest report and are bracing for tougher times ahead.
"Labour conditions are still expected to worsen especially in the second quarter of 2020 considering the circuit breaker measures as well as the sharp decline in global demand," Barnabas Gan, economist at United Overseas Bank, said.
The sharpest decline in employment was seen in the food and beverage services, construction and retail trade sectors, and this was only partially offset by the smaller growth in employment in the public administration and education, professional services and financial services sector.
Retrenchments reached 3,220 in Q1 2020, higher than the 2,670 in Q4 2019. Even so, this is lower than the 12,760 seen in Q1 2009 at the height of the Global Financial Crisis. However, the re-entry rate among retrenched residents dipped to 64 per cent, from 66 per cent in Q4 2019.
More local employees were also affected by business cessations - there were 1,537 in Q1 2020, up from 628 in the previous quarter.
In addition, 4,190 employees were placed on short work-week or temporary layoff, a five times increase from the 840 in Q4 2019.
Selena Ling, OCBC Bank's chief economist, said it looks "almost like a certainty" that retrenchment numbers and the unemployment rate will continue to rise in Q2 and Q3.
She added that the Jobs Support Scheme may have delayed the pain of layoffs until at least August, but what happens beyond remains a question.
This time, MOM also introduced a new Employment Diffusion Index, a measure of the breadth of employment change. The index fell to 38.7, from 55.7 in the previous quarter, indicating that employment declines were widespread across industries.
"This suggests a global or external trigger causing the downturn in growth and the fallout in the labour market, rather than a particular structural issue like a sunset industry or a specific competitiveness issue per se," OCBC's Ms Ling said.
Chua Hak Bin, senior economist at Maybank Kim Eng, added that a broader recession will require broader policy responses to prevent a downward spiral in the economy.