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Economy rides on job growth

(China Daily HK Edition)
Updated: 2006-10-25 08:51

Hong Kong's already vibrant job market has accelerated in the past few months, indicating the economy has picked up from a lull in the second quarter and that employers are confident about the business outlook.

Unemployment fell to a five-year low of 4.7 per cent in July-September and employment growth between May and September was the fastest since an economic recovery began three years ago.

"In July-September we saw the fastest increase in the labour force in 46 months, yet the unemployment rate fell to its lowest rate in 62 months. That's very positive," said David O'Rear, chief economist at the Hong Kong General Chamber of Commerce.

Accelerating employment growth points to a pick-up in economic activity from a sluggish second quarter when gross domestic product (GDP) was flat compared with the first three months of the year and grew 5.2 per cent from a year earlier, its slowest pace since late 2003.

"Employment has been increasing in the past few months at a more visible rate," said Vincent Kwan, chief economist at Hang Seng Bank. "I think we'll see that annual GDP growth in the third quarter was back above 6 per cent and, if this momentum continues, fourth-quarter GDP growth could also be above 6 per cent."

Signs that the US economy Hong Kong's biggest export market after the mainland is headed for a moderate, not sharp, slowdown and hopes that interest rates are close to peaking have boosted the economic outlook from a few months ago.

Kwan forecasts that better third and fourth quarters will result in 6.3 per cent GDP growth for the full year, down from 7.3 per cent in 2005 and 8.6 per cent in 2004, but still solid.

Confidence that the upturn in the economic cycle, which began in the summer of 2003, could last another few years is becoming more apparent among employers.

The mainland's economic boom is a prime driver of job creation in Hong Kong, particularly at the executive level, analysts said.

"Hiring in Hong Kong right now is probably double what it was a year ago," said Christine Greybe, managing director of executive search firm DHR International Asia Ltd.

"We're seeing a lot of demand for regional roles and specialist roles. Because the job market is better and companies' revenues are good, a chief executive who two years ago wasn't looking to move jobs may now look at the opportunities."

Greybe sees the executive market staying bullish through 2008 and the Beijing Olympics, which is already encouraging many multinationals to expand their operations in the mainland and Hong Kong.

Lower down the labour market, the strength of domestic demand and tourism is boosting demand for retail, hotel and restaurant staff and that is helping offset a slowing trade sector.

"For six years after the Asian financial crisis in 1997-98 during the economic downturn, people saved a lot of money," said George Leung, chief economist at HSBC. "As they have become more confident that economic recovery is sustainable they have started to spend and invest more. This could last another few years."

Not everyone is seeing better job prospects: structural unemployment is high as low-skilled jobs have shifted to the mainland. Many economists believe the economy is now close to full employment and the jobless rate will not fall below 4 per cent.

Excess supply of low-skilled workers has prompted calls for the introduction of a minimum wage and forced the government to urge voluntary introduction of minimum pay levels in some sectors to stop employers pushing down wages.

 
 

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