What is worrying about the latest rise in the unemployment rate to 6.7 per cent is the absolute reduction in the number of employed persons. Although unemployment has been rising over the past few years, it has been primarily due to an expanding labour force through immigration and young people joining the workforce. Until now, new jobs have been constantly created and the total number of employed persons has continued to grow. But the latest statistics show that things decidedly turned for the worse during the three months between November 2001 and January 2002. As more and more companies have trimmed their operations amid the economic downturn, there has been a net reduction of about 7,200 jobs, causing the total number of employed people to fall from 3.23 million to 3.229 million. The development will tie the hands of the Government as it tries to demonstrate to the world that it will adhere to fiscal discipline by taking steps to address a structural deficit. The Task Force on Review of Public Finances reckons that if nothing is done, the accumulated deficit will wipe out the SAR's current $369 billion fiscal reserves by 2008-09. Its calculations show that between 2002-03 and 2006-07, measures will have to be taken, either by cutting expenditure or raising taxes, to plug a budget 'black hole' of about $35 billion every year. But if new taxes are introduced, it will mean a further drag on the economy. And if expenditure is cut by dropping certain government programmes, it will lead to involuntary job losses and a reduction of public services. Yet such unpalatable measures seem unavoidable. Leaving the problem unaddressed would be most irresponsible as it would threaten Hong Kong's credit rating and the currency's link to the US dollar. Indeed, both Chief Executive Tung Chee-hwa and Financial Secretary Antony Leung Kam-chung have vowed to address the unemployment and structural deficit problems over the next three to five years. Over the past two years, the Government has tried to trim the public sector by reducing the size of the civil service through redundancies. But there is no reason why it should not also cut the salaries of serving civil servants and staff in the subvented sector, because they are certainly overpaid. Some legislators have dismissed the taskforce's report as yet another scare-mongering tactic by officials to stymie much needed expansion of social services. But even if official forecasts turn out to be inaccurate, the Government's fiscal situation is still grim. It is therefore unrealistic to expect Mr Leung to offer further fiscal relief in the next Budget.