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Singapore created 121,300 jobs last year, causing the unemployment rate to fall to 2 percent, a 14-year low.

This put a further squeeze on the already-tight labor market and as a result, two out of every three new jobs went to foreigners.

Overall, the number of foreign workers rose by almost 85,000, including 5,000 maids, according to preliminary Ministry of Manpower figures released on Tuesday.

Explaining the continued reliance on foreign workers, Minister of State for Manpower Tan Chuan-Jin said in a blog post that a “significant proportion” of the demand came from the construction sector, which added 22,200 jobs compared to 3,400 in 2010.

This is “an almost sixfold increase, as we increased the pace of public infrastructure projects, in particular for housing and transport,” Tan added.

Plans are under way to build 25,000 HDB flats this year and new MRT lines, including the Downtown Line along Bukit Timah Road.

Despite the rosy picture of demand for workers, the economic slowdown is starting to claim some casualties.

In the last three months of 2011, about 3,600 people were laid off, the highest number since the 2009 recession. Manufacturing, a pillar of the economy, was the worst hit. It shrank, with 1,900 jobs lost in the last quarter.

But Tan pledged that the Government would step up efforts to help Singaporean workers, by training them in new skills or helping them find new jobs.

Also, considerable resources have been put aside “to help companies continue with the necessary but understandably painful restructuring and consolidation for the longer term,” he said.

His remarks hint at possible measures the Government could introduce when it unveils its Budget on Feb. 17.

The layoffs, though on the rise, are not alarming, said economists interviewed.

Labor economist Hui Weng Tat of the Lee Kuan Yew School of Public Policy noted that layoffs in manufacturing are around 1,000 to 2,000 every quarter. So, the figure of 1,600 laid off in the last quarter of 2011 is within expectations, he added.

Retrenchments in the last quarter doubled to 3,100 compared to the previous three months. But, said Citigroup’s Kit Wei Zheng, “this figure pales in comparison with the peak of 10,900 retrenchments in the first three months of 2009.”

Looking ahead, employers indicate they have no plans to retrench.

Dr. Moh Chong Tau, president and chief executive officer of Makino Asia, a Japanese manufacturer of specialized machines and tools, said orders in Asia and the United States have not slowed.

“Orders are still coming in for the oil and gas, aerospace and medical industries, and there are vacancies for engineers, technicians and supervisors. I’m looking to recruit around 20 engineers and a dozen skilled workers this year,” he said.

At Feinmetall Singapore, general manager Sam Chee Wah said orders have dropped but this is when “small companies like us tend to focus on improving productivity.” Feinmetall’s 22 workers make testing cards for semiconductor wafers.

Despite the rise in layoffs, the labor movement is “most cheered [that] the overall job market continues to do well,” said Ong Ye Kung, deputy secretary-general of the National Trades Union Congress (NTUC).

“Even manufacturing, which is export-oriented and which the NTUC is most worried about, posted healthy positive growth for the whole year,” he added. It created 2,900 jobs last year.

But it is the services sector that continues to produce the bulk — 95,100 — of the new jobs.

Professor Hui believes the ramped-up hiring by hotels, restaurants and the retail sector was mainly responsible for the influx of foreign workers last year.

Karin Clarke of headhunting firm Randstad attributes the overall job growth to multinationals heading to Asian shores to “deliver their ambitious growth plans.”

“This fuelled job growth in Singapore as companies look to secure skilled people to drive business forward,” she said.

As demand for labor last year clearly exceeds the growth of the local workforce, which was 36,600, there is a need to improve productivity and restructure the economy up the value chain, said Tan, the Minister of State.

“However, this takes time while the demand is immediate,” he added.

Meanwhile, Hui is concerned about the steep rise in new jobs, which was filled largely by foreign workers, in an economy that grew by just 5 percent.

“The focus on quality growth does not seem to be borne out by the labor market numbers. GDP growth in 2011 seems to be driven by an increase in numbers rather than an increase in productivity,” he said.

Reprinted courtesy of Straits Times Indonesia. To subscribe to Straits Times Indonesia and/or the Jakarta Globe call 021 2553 5055.