Labour market to make uneven recovery

OCBC bank said the labour market has improved, but not out of the woods yet.

The year 2020 saw massive retrenchments and unemployment following the COVID-19 pandemic, government data shows.

Posting a two-decade low, total employment for 2020 contracted by 166,600, with more than 26,000 workers retrenched. The unemployment rate rose to 3%.

The Ministry of Manpower (MOM) expects the labour market to recover, albeit unevenly.

"Whilst the impact of COVID-19 on the labour market situation for 2020 has been significant, there has been a broad improvement in the fourth quarter of 2020.As global economic uncertainties persist, the labour market recovery is likely to be varied across sectors," the MOM said in a statement.

It reiterated that the government has put policies in place to secure this rebound, such as the SGUnited Jobs and Skills Package, the extension of the Jobs Growth Incentive by another seven months, the Career Conversion Programme, and other programmes on reskilling and upskilling jobseekers.

In a report, the OCBC bank said government policy played a significant role in supporting local employment during the unprecedented pandemic. New job opportunities, however, are skewed in favor of temporary and part-time employment.

Nevertheless, the bank said the rollout of vaccination programmes, both locally and abroad, will help the labour market recover in the second half of 2021.

The negotiations with Australia for a travel bubble as well as the talks of vaccine passports could also give tourism and hospitality sectors a much needed boost.

However, the bank flagged the possibile long-term effects of skill mismatch given the unemployment rate, ageing workforce, and the push towards more digital work setups.

"The resident long-term unemployment rate climbed further from 0.8% in June 2020 to 1.1% in December 2020. Whilst this is a lagging indicator to the economic cycle and is still relatively low compared to international norms, nevertheless, it could signify potential skills mismatches in the labour market. If this continues to climb further, this could portend a more structural challenge for the ageing workforce from potential skills obsolescence arising from digital and technology disruption," OCBC said.

OCBC expects the overall unemployment rate to decline below 3% for the full year of 2021.