The labour market remained tight last year but signs are emerging that the situation could soon turn gloomy.
Unemployment rates remained low last year, but an increase in retrenchments and a slower wage growth are worrying signs that economic restructuring will continue to bite.
The number of jobs created in the last three months of the year rose to 39,600, up from 33,400 in the previous quarter, according to preliminary figures in a Ministry of Manpower report released yesterday.
Overall, the economy created 129,000 jobs last year, slightly lower than the 136,200 in 2013. The overall unemployment rate was 2 per cent, compared with 1.9 per cent in 2013, while the resident unemployment rate was 2.7 per cent, down from 2.8 per cent in the preceding year.
The numbers painted a picture of a labour market that remained healthy but economists warned that the situation could get worse this year.
Layoffs are on the rise, with 3,800 staff let go in the fourth quarter of last year, up from 3,500 in the previous quarter.
About 12,800 lost their jobs in the whole of last year, up from 11,560 in 2013.
Real median income grew by 1.4 per cent last year, lower than the 4.6 per cent in 2013.
Over the past five years, real median income for residents, after adjusting for inflation, has grown 11 per cent, or about 2.1 per cent a year.
The tight labour market is making firms think twice about expansion and could be contributing to the higher retrenchment rates, said Bank of America Merrill Lynch economist Chua Hak Bin.
"Some firms may be forced to retrench staff or scale back (expansion plans) if they cannot meet the foreign worker limits."
Businesses are also expected to remain cautious about expanding due to a weaker global economic outlook, arising from volatility in the currency markets as well as slower growth in China.
OCBC economist Selena Ling said retrenchments can also be expected from firms which cannot cope with the ongoing productivity drive. "Some companies may have to shut down or move to cheaper locations," she added.
Efforts by the Government to encourage workers to upgrade their skills and become productive appear to be bearing fruit.
Training participation rate among residents aged 15 to 64 rose to a new high of 36 per cent last year.
This article was first published on January 31, 2015.
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