Employment shines amidst economic shadows

In fact, at least 110,000 jobs will be created.

According to CIMB, despite slower growth, the economy still managed to create sufficient jobs to nudge the seasonally-adjusted unemployment rate to 1.9% in 3Q12 (average 2.0% for the past six quarters).

Here's more from CIMB:

Some 27.9k net new jobs were created in 3Q12 vs. 1H12’s 29.5k. Although 2012 GDP is likely to come in at the lower end of 1.5-2.5%, the economy should be able to create 110k-115k new jobs vs. our start-of-the-year forecast of 90k-110k (9M12: 83.8k, 122.6k in 2011).

Considering Singapore’s labour shortage in service industries, inflationary pressures should remain elevated, as companies seek to pass on higher wages.

Preliminary data from the Ministry of Manpower show net employment gains moderating to 24.9k in 3Q12 from 2Q12’s 31.7k and 31.9k in 3Q11. The slowdown mainly affected the service sector, a reflection of the tightening of foreign-manpower controls.

Growth in service employment slowed to 11.3k in 3Q12, the least since 2Q09 (9M12: 44.4k vs. 9M11:65.9k). Despite higher layoffs in the tech sector, manufacturing still managed to create 3.7k new jobs in 3Q12 (10.4k in 9M12; 9M11: 4.9k).

And bolstered by public-infrastructure projects, construction continued to add jobs: +9.8k in 3Q12 vs. 2Q12’s +9.7k (9M12: 28.2k vs. 9M11: 13.6k). Seasonally adjusted, the unemployment rate was 1.9%, slightly lower than consensus’s 2.0% but toeing our 1.9% estimate (2.0% in 2Q12 and 2.1% in 1Q12).

Within the resident labour force, unemployment was unchanged from 2Q12’s 2.8% SA (2.9% in 3Q11). That for citizens was also unchanged at 3.0% SA. Although growth “could be weighted down by the subdued global economic conditions”, the government still thinks the economy can grow 1.5-2.5% this year and “at a modest pace in 2013”.

With that assumption and considering the inflationary bias inherent in its policy of restricting foreign labour, it will be tough for Singapore businesses to protect their margins if they can’t pass on their higher costs to consumers.