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Trade war

Trade war drags down Asian factory employment

Singapore manufacturing work force shrinks to 13-year low as retrenchments rise

Job cuts at electronic and optical product makers accounted for most of Singapore’s quarterly decline in manufacturing employment.   © Reuters

SINGAPORE -- U.S.-China trade tensions are weighing on manufacturing employment in Asia's export-reliant economies amid slackening demand.

According to statistics released last week by Singapore's Ministry of Manpower, total retrenchments in the city-state rose to 3,230 people in the January-March quarter from 2,510 a quarter earlier.

Of those 3,230, 1,040 were in manufacturing. That is close to triple the 380 manufacturing workers retrenched the previous quarter. Electronic and optical product makers accounted for most of these dismissals.

"The top reason cited for retrenchments was business restructuring and reorganization," the ministry said.

Following the latest cuts, Singapore's manufacturing work force was down to 484,000 people, the lowest level reported since the end of 2005.

Irvin Seah, an economist at Singapore's DBS Group Holdings, said the decline "is an ongoing phenomenon for many years mainly because of automation on the back of economic restructuring and the rising importance of the services sector." But he added, "The recent trade war has exacerbated the situation given [its] adverse impact on export demand."

Singapore, as a trade-reliant small economy, has taken a significant hit from the U.S.-China trade war. Non-oil domestic exports declined 15.9% in May from a year before, with electronics products declining 31.4%. The government last month lowered the top end of its projected economic growth rate range to 2.5% from 3.5%. The bottom end of the range remains 1.5%.

Even as the manufacturing work force contracted, services employment continues to grow, reaching 2.771 million in March from 2.755 million in December.

Howie Lee, economist at Oversea-Chinese Banking Corp., called the factory employment decline "a natural outcome of an economy that is evolving into a smart hub."

"As Singapore evolves into a capital-intensive and technology-driven hub, the labor share of output is naturally expected to continue declining through the booms and busts of the economy," he said.

Like Singapore, Taiwan too has seen manufacturing employment decline this year. Government data shows factory employment has fallen for three straight months, reaching 3.066 million in April. This correlates with the Nikkei manufacturing Purchasing Managers' Index survey, which has recorded falls in manufacturing employment since December.

Production of semiconductors and other electronics long powered the Taiwan economy. But with the outlook for the global economy uncertain, employers could consider further restructuring.

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