Chart of the Day: Ratio of vacancies to unemployed surged to unprecedented highs in 2Q14

Foreign manpower restrictions stoked a labour crunch.

Gaps within the labour market are becoming more evident, as job creation continues to dwindle and experienced its lowest since 1Q12.

According to DBS, one of the clearest outcomes from restructuring is that restrictions on foreign manpower has stoked a labour crunch. Unemployment since the restructuring began has averaged 1.9%. At this level, the economy is at full employment given that the natural rate of unemployment (NAIRU) in Singapore is widely regarded to be 2%. This underscores the tightness in the labour market.

Moreover, job vacancies continued to rise. Vacancies rose to 63,900 as of 2Q14, about 23% higher than one year earlier. The ratio of vacancies to unemployed persons has risen to a relatively high level of 1.36 in the second quarter.

Here’s more from DBS:

Total jobs created in the second quarter has moderated to 27,700, from 33,700 in the same period last year. This is the lowest since 1Q12. Yet job vacancies continue to outstrip job creation. The difference between job vacancies and job creations has risen to a multi-year high of 36,200 as of 2Q14. Employers are finding it difficult to fill up openings, which explains the moderation in job creations despite the continued rise in vacancies.

This gap follows from the curb on foreign labour supply. With increasingly tighter restrictions on the hiring of foreign workers, many employers are finding it harder to fill these job openings. At times, even higher wages is not enough to entice the locals to take up these jobs since these are jobs that Singaporeans shunned in the first place. Increasingly as companies continue to struggle with the labour crunch, business activities will be affected.