Is Singapore's labour market bottoming out?

Unemployment rate inched lower to 3.1%.

For job seekers in Singapore, the improvement in Singapore's labour market seen in 2Q17 isn’t enough reason to pop the champagne just yet.

According to DBS Group Research, the labour market is not entirely out of the woods yet. Whilst the seasonally adjusted unemployment rate for residents inched modestly lower to 3.1%, from 3.2% previously, total employment still decline by 7,800 in the quarter.

"Excluding foreign domestic workers, the decline was even larger at 8,400. Nonetheless, this is less severe compared to the 9,400 drop in the previous quarter," DBS Group Research said, citing data from the Ministry of Manpower (MOM).

According to MOM, the contraction in employment growth for the quarter was mainly due to the continued decrease in Work Permit holders in construction and manufacturing, as a result of the earlier tightening in foreign labour policy.

"Whilst the policy hasn’t been made tighter recently, the lag effect is probably due to the contracts of some workers not being renewed," the brokerage firm said.

However, retrenchments continued to remain higher than usual. About 3,500 workers were retrenched in 2Q17. While this is fewer than in the first quarter at 4,000, it is still higher than the levels at approximately 2,500 seen in previous years when the labour market was relatively more buoyant.

"Employment prospects remain mixed. A more pronounced improvement can be achieved only when the economic recovery becomes more broad-based," DBS Group Research said.