The number of retrenchments in Singapore rose significantly in the third quarter of 2023, reaching 4,100 layoffs, the highest figure since Q4 2020. Despite the labor market expanding for eight consecutive quarters, early data from the Ministry of Manpower (MOM) indicates a concerning trend. The increase in retrenchments, up from 3,200 in the previous quarter, brings the year-to-date total to 11,120, nearly double the 6,440 recorded for all of last year.

While the overall unemployment rate remains low due to labor market tightness, MOM has noted a “slow uptrend” in unemployment levels. The wholesale trade sector primarily contributed to the surge in layoffs, attributed to a weaker external outlook and ongoing business restructuring efforts. Patrick Tay, assistant secretary-general of the National Trades Union Congress (NTUC), expressed concern that the overall layoff numbers may surpass pre-COVID levels from 2018 and 2019.

Despite these layoffs, total employment—excluding migrant domestic workers—grew by 24,000 in Q3, nearly matching the 24,300 increase in Q2. This growth was driven by sectors such as financial services, professional services, and health and social services, which generally offer higher-paying jobs.

Unemployment rates in September remained stable, with overall unemployment at 2%, resident unemployment at 2.8%, and citizen unemployment inching up to 3% from 2.9% in August. MOM emphasized that low unemployment rates, despite the rise in retrenchments, suggest that many affected workers have been able to find new jobs quickly.

However, the pace of employment growth has slowed compared to the previous year, coinciding with a global economic slowdown. Business expectations for hiring in the coming months have also diminished, with only 42.8% of firms indicating intentions to hire, down from 58.2%. Similarly, the percentage of companies planning to increase wages fell to 18%, down from 28%.

Economists have mixed views on the labor market’s future. OCBC chief economist Selena Ling noted the cautious outlook in external demand and the escalating geopolitical tensions, suggesting that employment growth may gradually ease. UOB senior economist Alvin Liew expects the overall unemployment rate to rise slightly to 2.1% due to a measured increase in retrenchments, particularly in sectors reliant on external demand.

Conversely, Maybank senior economist Chua Hak Bin pointed to the positive employment growth of about 24,000 as a hopeful sign amid weak GDP growth of just 0.7% in Q3, suggesting that labor demand may hold up in anticipation of an economic recovery in 2024. The full report detailing the labor market’s performance in Q3 is expected to be released in mid-December.