Hong Kong's labour market weakening even amid steady unemployment rate

Employment growth is in an enfeebled state.

The labour market has been weakening despite the steady unemployment rate, and in particular, employment growth has slowed very sharply to near 0%y/y in 1H14.

According to a research report from UBS, this has been driven in part by job cuts in the financial sector.

Changes in the labour market provide important clues about income growth and inflation in Hong Kong.

A rise in unemployment implies weaker wage growth and less pressure on inflation.

For its 12-month outlook, UBS noted that the domestic sectors, in particular construction (thanks to the strong pipeline of infrastructure projects) and hospitality services, are still creating jobs.

But in part reflecting tightening liquidity, job growth in the higher paid service sector will remain subdued.