Economists and recruitment specialists warn that the employment market in Hong Kong will remain weak in the second quarter, following a recession-plagued first quarter. They say the economic woes surrounding the city will linger as the global outlook remains grim. Hiring expectations will continue to be slow, with companies becoming more cautious and selective in filling positions while resorting to cost-cutting measures to weather the difficult time. According to Frederic Neumann, senior economist at HSBC, the fundamentals of Hong Kong's economy are still strong and there is no vulnerability, 'but it doesn't mean that the economy is not severely affected by what is going on elsewhere in the world. Hong Kong will see a contraction of 6.3 per cent in the second quarter, and will feel the head wind from a weak global economy for quite some time'. Banking and financial services have been hit hard by the global financial meltdown with job losses in these sectors. However, according to Mr Neumann, Hong Kong has not seen the same level of retrenchments as other financial centres. 'Banks in Hong Kong are fundamentally sound without any concerns over the asset quality,' he said. 'We haven't had a credit bubble burst at this point. There are probably more job losses [ahead] within the finance sector, but nothing really reflects any fundamental weakness in our economy.' Among other factors that might provide a drag on Hong Kong's economy is the rising unemployment rate that is likely to cap people's spending and dampen market sentiment, but Mr Neumann doesn't believe the unemployment situation will be as severe as in previous downturns and expects this to bottom out by the end of this quarter, with Hong Kong's economy likely to see some stabilisation in the second half of the year before positive growth resumes next year. Amid the lingering woes, there are positive factors that will help contribute to the city's stabilisation and keep unemployment in check. According to Mr Neumann, the consumer retail sector will hold up as growing numbers of mainland tourists increase their spending in Hong Kong. Another area to show a positive sign will be logistics. He expects Hong Kong to benefit from its role as a transport hub when the mainland's imports start to pick up. 'If unemployment stabilises in the second quarter, there is a good chance that the situation may improve in the second half of the year,' Mr Neumann said. 'If the government provides a further boost to the economy with increased expenditure on infrastructure towards the end of this year and in 2010, it will also help stabilise the unemployment situation by reabsorbing some of the redundant labour force.' Improvement of domestic demand on the mainland and improved sentiment of the financial market will be instrumental in providing enough of a stimulus to help stabilise the local labour market. 'There have been signs indicating that China's import volume is picking up and we expect it will ultimately be reflected in Hong Kong's economy in three to six months,' Mr Neumann said. Despite the signs showing a glimmer of hope for a more stable economy in the months ahead, the hiring expectations of Hong Kong companies are relatively low. Most of the positions available in the employment market are replacements, rather than driven by businesses expanding. Mark Carriban, managing director for Asia at Hudson, said in a recent report that the hiring expectations of Hong Kong companies for permanent positions were the lowest in the past 11 years, and that it also had the lowest rating in terms of hiring expectations among the five Asian cities surveyed. The others polled were Beijing, Shanghai, Singapore and Tokyo. According to statistics, Hong Kong's jobless rate rose to 5 per cent last month, from 3.3 per cent for the same period last year. While massive layoffs were not anticipated this quarter, as had happened in previous months, companies would continue to implement cost-cutting measures, such as restructuring, freezing headcount and asking staff to take leave without pay, said Fiona Yung, executive director of Tricor Executive Resources. 'Companies remain very cautious about hiring and are taking a longer time to search for the right candidate,' Ms Yung said. 'With a larger supply of candidates, employers are in general more critical about candidates' skill sets and relevant experience, and would expect a perfect fit.' She said that other than technical competencies, attributes such as exceptional English communication skills, interpersonal skills, a mature personality, a positive work attitude and job loyalty were pivotal factors that would influence the employers' hiring decisions. 'There has been a big reduction in the amount of hiring since the first quarter. Within the banking sector, front office positions including sales, trading, research and corporate finance have reduced in numbers. Information technology, media, telecoms and retail are also feeling the pain from the economic downturn,' said James Carss, director of banking and financial services at Hudson. While the banking and financial services sectors have been hardest hit by the global financial crisis and will see more redundancies this quarter, Andrea Williams, managing director of Ambition Hong Kong, said that insurance services providers had been less prone to layoffs and had been hiring consistently at all levels. The recruitment specialists have noticed that despite the low levels of recruitment sentiment in the finance sector, market demand for financial specialists with knowledge and experience in compliance, risk and regulatory functions were still high. 'In general, companies that are hiring tend to target people at the more senior level who are very skilled and experienced within that area,' said Mr Carss, adding that it could be a difficult time for less experienced people particularly in corporate finance to find a new role at junior or middle level. In the employer-led market, a tough time for employees means that it will result in a good opportunity where companies can take advantage of an abundant supply of more qualified candidates to upgrade their staff and strengthen their edge. With senior and middle management positions becoming scarcer in the job market, except for those that require specific technical skills and experience in a niche industry, Ms Yung advised job seekers to be flexible and realistic about their expectations when considering the remuneration package, working hours and conditions. Figures from the latest South China Morning Post/admanGo survey, which tracks job vacancies advertised in Hong Kong's six major recruitment publications, revealed that the total number of jobs posted for the first quarter this year stood at 23,508, a decline of 69.1 per cent from the corresponding period last year. Significant drops were recorded across all major industries on a year-on-year basis including manufacturing (down 79 per cent), banking, finance and investment (down 76 per cent), trading (down 75 per cent), clothing and fashion (down 74 per cent) and hotel and catering (down 73 per cent). Sectors such as education and training, pharmaceutical, health care and non-profit organisations were more resilient and displayed less severe drops in the first quarter. In a tough economic climate, companies should encourage communication between managers and staff to maintain staff morale, Mr Carriban advised.