Singapore's unemployment rate rose to a seasonally adjusted 2 percent in the first quarter amid mounting uncertainties in the global economy, and analysts warned the jobless rate may climb higher in the months ahead.
CNBC.com
Preliminary data from the Ministry of Manpower showed on Wednesday that employment rose by 68,400 in the three months to the end of March, up from 62,500 in the previous quarter.
"Unemployment will creep up with easing growth, especially if the external environment deteriorates," said Irvin Seah, a DBS economist.
Trade-driven Singapore exports about a third of its goods and services to the United States and Europe, leaving it especially vulnerable to an economic downturn in the two major markets.
The booming services industry accounted for 42,900 new jobs, or 63 percent of all new jobs. Construction accounted for 13,400 new jobs and while manufacturing created 11,900 jobs.
The fourth-quarter jobless rate was revised to 1.7 percent from 1.6 percent.
Given Singapore's tight labor market, Seah said a higher jobless rate will take some pressure off rising labor costs that have eroded the island's competitiveness compared to other Asian centres such as Hong Kong.
"Costs have been rising faster than productivity in Singapore and that is not good for cost competitiveness," he said.
Inflation is at a 26-year high, and the central bank said on Tuesday that the cost of doing business in Singapore, a base for international companies and their families in Asia, had risen.
The central bank said that the unit business cost index for the manufacturing sector -- which measures changes in the cost of producing one unit of manufacturing output after accounting for productivity changes -- rose 4.5 percent in the fourth quarter from a year ago, the seventh straight quarter of growth and the most rapid rate of rise since the fourth quarter of 2001.
It said that this mainly reflected a sharp rise in unit labor costs as well as government rates and fees.
The Singapore economy grew at an unexpectedly strong annualized rate of 16.9 percent after seasonal adjustments in the first quarter, lifted by a recovery in pharmaceutical production. The government expects the economy to grow between 4-6 percent this year, barring a sharp downturn in the United States.
Singapore's central bank expects the country's unemployment rate to stay below 2 percent this year, compared to an average of 2.1 percent in 2007.
Singapore reports unemployment on a quarterly basis.