HK's labour market

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????????? Hong Kong SAR Government
HK's labour market
21 September 2005
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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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II. Long-term unemployment rate on the rise ?
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Long-term unemployment rising disproportionately
during downturn yet also falling back distinctly
during upturn


3
14
12
2.5
Long-term
unemployment rate
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(left scale)
2
8
1.5
Overall
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unemployment rate
(right scale)
1
4
0.5
2
0
0
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
1997
1998
1999
2000
2001
2002
2003
2004
2005
10
Improvement in long-term unemployment in latest
upturn is across-the-board
Percent
6
Manufacturing
Construction
Wholesale, retail, import/export, restaurants
and hotels
5
Transport, storage and communications
Financing, insurance, real estate and business
services
4
3
2
1
0
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q2
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
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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 sectors
Change in employment Change in employment Change 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 PCErelated sectors 0.46 0.30
of which Trade-related 0.42 0.49
Overall 0.32 0.31
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IV. HKs Phillips curve
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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 mismatch ? Wage inflexibility? Labour
  legislation? Ageing? Welfare policy? High public
  transport fare public housing policy?
  Increasing barriers to businesses and/or less
  entrepreneurship?

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Thank you
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Correlation with output gap









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Value added per person 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