Change in economic structure means more people take longer to find work Profound changes in Hong Kong's economic structure mean the 'natural rate' of unemployment - the number of people between jobs when the economy is operating at full capacity - has doubled in the past 15 years, monetary chiefs say. Research by the Hong Kong Monetary Authority, released yesterday, said the natural rate of unemployment had risen from between 2 and 3 per cent in the late 1980s to between 3.5 and 4.5 per cent now. An economist warned that the increase could add to welfare expenditure. The natural rate of unemployment is based on the time within which a job seeker can reasonably expect to find work. Since people are always moving between jobs, the rate of unemployment can never be zero. The rise in the natural rate of unemployment means Hong Kong can be said to have attained full employment if the actual unemployment rate drops to 4.5 per cent. Hong Kong's actual unemployment rate stood at 7.1 per cent in April. The report attributed the increase to the 'profound structural change' in the economy, with the services sector taking over from manufacturing as the main source of jobs. Given the working population of about 2 million people in the 1980s, a 3 per cent natural rate of unemployment meant about 60,000 people were moving between jobs at any one time two decades ago. Based on today's labour force of about 3 million people, a 4.5 per cent natural rate of unemployment would mean 135,000 people were between jobs at any one time. The report said one of the pointers to a rise in the natural rate of unemployment was the increase in both the median duration of unemployment and the proportion of those people without work who have been unemployed for a long time. While the rise in the natural rate partly reflected weak economic conditions, the report said it might also be due to a surge in the number of people who had lost manufacturing jobs and faced difficulties finding work in other sectors because they lacked the necessary skills. Terence Chong Tai-leung, an associate professor of economics at Chinese University, said the rise in the natural rate of unemployment could mean the government paying out more in welfare, given that there was a larger pool of people seeking work at any one time. Dr Chong said the rise reflected the fact that employers dismissed staff more frequently or took on people on short-term contracts. He also warned that Hong Kong might not enjoy full employment, even when the economy was booming, because mainlanders could travel to Hong Kong more easily than in the past.