HK's labour market
21 September 2005
香港特別行政區政府香港特別行政區政府Hong Kong SAR GovernmentHong Kong SAR Government
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3
Several angles
• Manpower resource balance – skill mismatch? – job mismatch?
• Long-term unemployment rate on the rise?
• Pace of employment growth in current upturn, c.f. average cycle in the 1980s and 1990s
• Major shifts in Phillips curve over time ?
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I. Manpower resource balance
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6
7
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II. Long-term unemployment rate on the rise ?
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Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q11997 1998 1999 2000 2001 2002 2003 2004 2005
0
0.5
1
1.5
2
2.5
3%
0
2
4
6
8
10
12
14%
Long-term unemployment rising disproportionately during downturn;yet also falling back distinctly during upturn
Long-term unemployment rate
(left scale)
Overall unemployment rate
(right scale)
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Improvement in long-term unemployment in latest upturn is across-the-board
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q21996 1997 1998 1999 2000 2001 2002 2003 2004 2005
0
1
2
3
4
5
6Percent
Manufacturing
Construction
Wholesale, retail, import/export, restaurants and hotels
Transport, storage and communications
Financing, insurance, real estate and business services
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III. Slow-down in pace of employment upturn after
98?
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Job losses in manufacturing vs job gains in service sectorsChange in employment
Between1990 and 1996
Between 1997 and 2003 trough
Between 2003 trough and 05 H1
(‘000) (‘000) (‘000)
Manufacturing -269 -168 -48
Construction 44 -36 1
Services 551 236 217
Wholesale/retail trade 69 -33 25
Import/export trade 92 60 98
Restaurants/hotels 44 -24 18
Transport, storage and communications 63 2 7
Financing -15 8
Insurance 88 8 4
Real estate 17 11
Business services 57 52 8
Community, social and personal services 138 168 38
Total 296 25 170
Job losses -302 -291 -59
Job gains 598 317 229
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Average change in employment (% per annum)
Between1990 and 1996
Between 1997
and 2003 trough
Between 2003 trough and 2005 H1
Manufacturing -7.1 -7.7 -9.1
Construction 3.0 -2.1 0.1
Wholesale/retail, restaurants and hotels 3.6 -1.6 3.8
Services ex wholesale/retail, restaurants and hotels
5.4 2.6 4.1
of which: Trade-related 4.9 1.4 6.7
Total employment 1.7 0.1 2.6
c.f.
Domestic exports -2.2 -6.7 -2.8
PCE 6.4 -0.5 6.4
Construction 5.3 -5.9 -7.8
Exports of goods and services 11.8 5.0 13.8
GDP 5.4 1.6 8.6
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% change in employment per % change in output
Between1990 and 1996
Between 2003 trough and 2005
H1
Manufacturing 3.29 3.19
Wholesale/retail, restaurants and hotels
0.56 0.59
Services ex PCE–related sectors 0.46 0.30
of which: Trade-related 0.42 0.49
Overall 0.32 0.31
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IV. HK’s Phillips curve
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Hong Kong : Any sign of shift in Phillips curve over time?
-4
-2
0
2
4
6
8
10
12
14
0 1 2 3 4 5 6 7 8 9Unemployment rate (%)
Wage inflation (%)
8586
8788
8990
91
92
93
94 95
9697
98
99
200001
02
0304
05 Q1
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Discussion:
• How much more can unemployment improve further?
• Cyclical vs structural part of unemployment?
• Shifts in long-run Phillips curve and nairu?
• Structural factors/rigidities: Increasing job/skill misma
tch ? Wage inflexibility? Labour legislation? Ageing?
Welfare policy? High public transport fare & public h
ousing policy? Increasing barriers to businesses and/or
less entrepreneurship?
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Thank you
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US Phillips Curve (1960-2004)
-2
0
2
4
6
8
10
12
14
16
2 3 4 5 6 7 8 9 10
1960s 1970s 1980s 1990s 2000s
CPI
infla
tion
(%)
Unemployment rate (%)
60
616263
65,98 64
66
6768
6970
71
72
73
74
75
7677
78
79
80
81
82
83
8485
86
878889
90
91
9293
9495
96
9799
00
01 020304
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US Phillips Curve (1960-2004)
-2
0
2
4
6
8
10
12
14
16
2 3 4 5 6 7 8 9 10
CPI
infla
tion
(%)
Unemployment rate (%)
60
616263
65,98
64
66
6768
69 70 71
72
73
74
75
76
77
78
79
80
81
82
838485
86
878889
90
91
92939495
969799
0001
0203
04
Oil shock period
Mid-late 1970s
Early 1970s, late 1980sto mid 1990s
1960s
Late 1990s tonow
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Beveridge curve is downward-sloping
0
1
2
3
4
5
6
7
0 1 2 3 4 5 6 7 8 9
Unemployment rate (%)
Vacancy rate (%)
85
86
87
88
89
90
91
92
9394
95
9697
9899
2000
0102
03
04
81
8283
84
24
Manufacturing
0
1
2
3
4
5
6
7
0 1 2 3 4 5 6 7 8 9
Vacancy rate (%)
Unemployment rate (%)
Services sector
0
1
2
3
4
5
6
7
0 1 2 3 4 5 6 7 8 9
Vacancy rate (%)
Unemployment rate (%)
Beveridge curve by sector
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Phillips curve for high-skilled and low-skilled workers
-5
0
5
10
15
20
25
0 1 2 3 4 5 6 7 8 9 10
Unemployment rate (%)
Wage inflation (%)
Low skilledHigh skilled
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Correlation with output gap
Lag 1 quarter
Lag 2 quarters
Lag 3 quarters
Lag 4 quarters
Overall unemployment rate -0.89 -0.90 -0.90 -0.88 Long-term unemployment rate 6 - 9 months -0.73 -0.80 -0.80 -0.73 9 - 12 months -0.68 -0.80 -0.83 -0.82 >12 months -0.45 -0.59 -0.68 -0.73
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Value added per person
1993 2003
(‘000) (‘000)
Manufacturing 172 247
Services 347 390
W/R, I/E and R/H 236 283
Transport, storage and communication
250 351
Financing, insurance, real estate and business services
734 532
Community, social and personal services
245 307
Economy average 306 373
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% change in employment per% change in GDP
Trough 2 years after trough
1982 0.26
1985 0.22
1989 0.11
1995 0.87
1998 0.20
2003 0.36
Peak-to-Peak
1987 – 97 0.31
Average: 0.36