If anyone thought economic recovery in the United States would kickstart Hong Kong's job market, this month's unemployment figures represent a dose of cold water. Economic restructuring is a harsh beast and all sectors continue to show weakness. Economic insecurity permeates most strata of society. It is increasingly clear that a rapid rebound in employment prospects of the sort which occurred in 1999-2000 is unlikely. Hong Kong faces restructuring in many industries as a result of its changing economic role. Firms long-insulated from severe competition must restructure to stay viable. Pacific Century CyberWorks is the best example, but there are many others. However, we should be cautious about jumping to overly pessimistic conclusions. Unemployment is a lagging indicator that only improves some months into an economic recovery. The increase in the jobless rate to seven per cent in the three-month period to March, from 6.8 per cent a month earlier, includes seasonal distortions. When temporary jobs created over the Lunar New Year holiday period are accounted for, it seems the underlying rate of joblessness has remained static during the first quarter of the year. There are no simple answers to the SAR's high jobless rate. A sustained global expansion will undoubtedly help, given our dependence on international trade. The pegged exchange rate forces the whole economy to make a choice that boils down to either lower wages or higher unemployment. At such times, people inevitably turn to the Government, which has an important role to play in retraining laid-off workers. Whether further large scale job creation schemes should be created is debatable. For a city economy, Hong Kong has a large public sector and a growing welfare culture. While the emergence of a class of long-term unemployed workers threatens social stability, spending public money for low grade jobs promises to embed economic stagnation. What is needed is true political vision as to the kind of economy Hong Kong must become if it is to sustain its standard of living. That will inevitably be deeply integrated with the Pearl River Delta and almost entirely focused on high value-added services. Pressing policy issues revolve around a proposed population policy and reform of protected domestic sectors if new types of businesses are to emerge. Fortunately, this is happening without government involvement. Sticking with the discipline is the only realistic option.
