Hope on the horizon for Hong Kong’s lethargic job market

Hong Kong's unemployment rate might have held steady at 4.2% for the three-month period to October, but HSBC says the headline number hides more positive signs of structural improvements.

Donna Kwok, HSBC’s economist for Greater China, said total employment's back above pre-crisis levels, the labour force's still expanding, and the two hardest hit worker segments by age and sector) are no longer in crisis mode.

“With the seasonal Christmas and Chinese New Year boost around the corner, household confidence and spending look set to perk up further,” she said.

The improvement in the unemployment rate was concentrated mainly on internally-facing sectors, including the food and beverage services, cleaning services, the foundation and superstructure sectors and the wholesale sector.

“Total employment, however, rose for the fifth straight month to over 3.53 million in that period. On a seasonally adjusted basis, employment is now also back to pre-global financial crisis levels in record high territory. At the same time, the labour force rose for the sixth straight month, by 2.1k to 3.68 million,” Kwok said.

Job conditions in the two hardest hit worker segments - being the 15-24 years by age and the construction sector by sector - are no longer flashing red either, with the former falling to 13.9% from 14.8% previously, and the latter to 6.2% from 6.6% before.

Both these sectors make up for just under a tenth of the labour force each and sit at the lower end of Hong Kong's income spectrum, making them useful sectors to monitor once the new minimum wage legislation (min HK$28 or US$3.6 / hour) comes into effect in May 2011.

According to Kwok, Hong Kong's service-driven economy is far from slowing down, and unemployment is starting to stabilize close to its long-term trend.

“Despite lingering uncertainties in EU and US demand, headcount continues to be expanded as a result of strong demand,” the economist said, adding, “an impending seasonal boost will likely further perk up labour market conditions next month, helping to close Hong Kong's 2010 domestic demand performance on a strong note.”