bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Suzanne Harrison

Optimists may be disappointed to hear that Hong Kong's unemployment rate may never get back to the pre-economic crisis levels of 1 to 2 per cent.

In fact, about 4 per cent may be the best achievable in the 'foreseeable future', according to analysts.

Last month's unemployment rate - released last week -  came in unchanged at 5 per cent from June, higher than expectations of 4.9 per cent. It was the first time in three months the figure had not fallen.

This could have been a seasonal phenomena. Economists generally are confident of upcoming monthly declines.

Still, that rate may never return to 'Asian miracle numbers', say some who closely monitor the labour market.

'I'm confident the unemployment rate will slow down further . . . but will never come down to levels Hong Kong used to have before the crisis,' said Credit Suisse First Boston senior regional economist Dong Tao.

'I'm confident in cyclical recovery, which will drive down unemployment and I'm confident Hong Kong is on track for a recovery. [But] I feel concerned about the structural problem and I'm also concerned about the quality of incoming labour supply.'

Mr Tao and others cite the structural unemployment problem as the biggest threat to improving data.

'Hong Kong lost some of its key capabilities in the past from the manufacturing sector [to the mainland] and also as a tourist destination. These are still valid, but I think the most rapid expansion period is over,' Mr Tao said.

'I'm afraid there is not much the Government can do [but] they must train these young graduates.'

Hong Kong University of Science and Technology economics professor Francis Lui Ting-ming agrees.

'I can agree with that [the data not reaching pre-crisis levels]. Before the crisis, Hong Kong's average unemployment over 10 years was 2.5 per cent,' Mr Lui said. 'Hong Kong's economy is recovering and . . . that will create jobs that will lower the unemployment rate to some extent. However, the great difference is the structural change.'

Part of Mr Lui's reasoning behind the structural unemployment rests more with the belief there is a low number of 'professionals' in Hong Kong that would create the wealth flow-on effect.

For example, his figures show 10 per cent of Hong Kong's workforce is considered professional. If the SAR could increase that to 25 per cent, 'then those people who are over 40 will find it much easier to find jobs'.

'But this is not happening now and won't for a long time,' he said.

'In the long run, we need to upgrade the skill levels of everybody.'

Mr Lui said he did not dispute the belief that unemployment data could be lowered to pre-crisis levels because it was possible wage declines in the lower end may increase the workforce.

'We do not necessarily want that to happen . . . but it might be possible the [unemployment] rate will go down [to less than 3 per cent] if the wages are adjusted down.

'Suppose for example, the wages rate is cut [in the low-end] by 20 per cent, then I'd say the unemployment rate would go down to 1-2 per cent.'

Hong Kong General Chamber of Commerce chief economist Ian Perkin explains it simply.

In the early 90s, when the rate was 1 to 2 per cent, people were leaving Hong Kong.

'We were worried about a diminishing population,' Mr Perkin said. 'I think we may now have to lie between 4 and 4.5 per cent for the foreseeable future.'

In the near-term, Hong Kong's economists and academics are optimistic as the recovery stimulates more jobs.

With an expected pick-up in construction work at the year-end [particularly with the building of Disneyland and the Westrail project] coupled with slow but sure retail sales rises, there is little reason to think otherwise.

Most economists were not surprised by last month's 5 per cent unemployment rate.

As school and university graduates flooded the market, this figure should not have been unexpected, and the August results may reflect rising employment as many of those graduates find jobs.

'I think the rate will continue to improve as in the last few months we've been looking at employment creation . . . that's been rising in the past few months, so that reflects the fundamentals pretty well,' said HSBC chief economist George Leung Siu-kei.

'August will definitely go to 4.9 per cent . . . we expect unemployment rates to improve to 4.5 per cent by the end of this year . . . still somewhat higher than the normal 2 to 3 per cent.'

Chinese University Department of Economics senior professor Sunny Kwong Kai-sun aims for a 3 per cent year-end unemployment rate next year, saying the recovery will have the desired affect over time.

'One thing is the workforce in Hong Kong is expanding at 2 per cent every year because of the natural growth of Hong Kong, so if Hong Kong is to lower the unemployment rate then it has to create more jobs,' Mr Kwong said.

'This has to come from continued expansion of the economy, and although it's doing that it's taking time to trickle down [to jobs].'



Magic jobs numbers of past may not be repeated