The surprise retrenchment at Bank of East Asia has sounded an alarm about worsening employment prospects in the city, as economists warned of a “significant rise” in the jobless rate across all sectors before year’s end.
Apart from the downturn in the tourism sector, construction, financial services and property are also becoming vulnerable to layoffs in the near future, economists warn, as the spillover from the slowing mainland economy and sluggish global demand take a toll on the city’s pillar industries.
Bank of Communications chief economist and strategist Law Ka-chung forecast the jobless rate would exceed 4 per cent by the end of the year, which would be the highest since 2010. The first-quarter figure was 3.4 per cent.
“There will be more layoffs in the financial sector for sure,” said Rouella Landicho, a manager at Morgan McKinley, which specialises in recruiting professionals for financial institutions.
An international securities firm planned to lay off workers in the city next month, with most being sales staff, Landicho said.
She said frontline employees and those who worked in cash equity departments and companies with closer mainland ties were exposed to a greater risk of being laid off in the coming year.
Landicho said a gloomy regional outlook had made many of her clients less ambitious in expanding their operations in the city.“This year started very slowly,” she added.
Sherry Zhang, an analyst at rating firm Moody’s, blamed “the deteriorating external macro-economic conditions and tightening interest rates” for its negative outlook for the city’s banking sector.
“Anything related to the securities side is vulnerable due to the stock market crash last year, thinning transactions and fewer IPOs,” DBS economist Lily Lo said.
The city’s once booming construction sector was also suffering, with its jobless rate increasing 0.5 percentage points to 5.4 per cent between February and April.
Wong and Ouyang (Hong Kong ), a renowned local architectural firm, reportedly told its staff that their salaries would be cut 15 per cent from June 1. The firm refused to comment.
“It will not be a surprise to see some companies being forced to cut costs in the face of a tough market ahead,” said Christopher Law, a director at architectural firm Oval Partnership. He said the number of government construction contracts approved by the Legislative Council was sharply down on last year. “Architect firms will be the first to be hit once more projects are deferred,” he said.
“This is just the beginning,” said economist Law Ka-chung, adding that a higher jobless figure typically came nine months after a slide in GDP growth.
The city’s economic growth slowed from 3.1 per cent in the second quarter last year to 0.8 per cent in the first quarter this year, while the jobless figure remained between 3.3 and 3.4 per cent in the same period.
news source & image credits: scmp.com