Common Misinterpretations of Labour Market Statistics

The Manpower Research and Statistics Department at the Ministry of Manpower publishes Labour Market Reports on a quarterly basis. The reports include findings from a comprehensive set of statistical indicators to provide a timely sense of labour market conditions.

Understanding what these indicators mean, and how trends should be interpreted is necessary in order to draw appropriate inferences from the data. Here are some common misinterpretations of labour market statistics:

The increase in employment is not the same as the number of jobs being created

In general, employment increase follows from job creation, but they are not the same because:

(a) Jobs could be created but have yet to be filled;

(b) An employed person could hold multiple jobs; and

(c) Employment increase shows the number of persons who took on jobs, after netting of those who left employment during the same time period.

Taken together, the number of jobs created could be more than the increase in employment.

Not employed ≠ unemployed

Persons who are not employed can be:

(a) Unemployed persons – people who are not working, but actively looking for a job and available for work; or

(b) Persons outside the labour force – people who are neither employed nor unemployed, and could be involved in activities other than work e.g. retired, caring for children or the elderly, full-time studies.

This is in line with the statistical definitions recommended by the International Labour Organisation.

A higher unemployment rate does not necessarily mean lower employment growth

An increase in unemployment need not necessarily be due to persons who left employment. Unemployment can increase when persons who were previously outside the labour force begin looking for work (e.g. fresh graduates or re-entrants to the labour market).

The unemployment rate is calculated as the percentage of unemployed persons to the labour force, comprising the employed and the unemployed. It is not derived by taking 100% minus the proportion of persons in employment.

A rise in retrenchments does not equate to a rise in unemployment

Retrenchment occurs when employees are made redundant in their existing job roles. This can be due to various reasons such as restructuring, recession or high costs. Retrenchments may occur even in periods of economic growth, when companies restructure and reorganise.

A rise in retrenchment does not equate to a rise in unemployment, nor a decline in total employed persons. This is because:

(a) Retrenchment is one of the many factors that can lead to unemployment. Besides retrenchment, people may leave their jobs for other reasons such as resignations, and expiry of employment contract. Unemployment can also occur when persons enter the labour force, as previously indicated.

(b) Retrenched workers could re-enter employment when they take up another job, or leave the labour force (e.g. to take a break).

Use seasonally adjusted data for indicators with strong seasonal patterns

Data may show seasonal patterns, that is, variations within the year, which repeat quite regularly from year to year. For indicators with strong seasonal patterns, comparisons between consecutive periods, e.g. quarters, should be done using the seasonally adjusted series. If not, it can lead to erroneous conclusions.

For instance, unemployment rates are typically higher in June, when fresh graduates enter the labour market and students look for vacation jobs. If we compare June’s unemployment rate with March’s unemployment rate, we may observe that the unemployment rate has increased, but this may not be the case after we account for seasonal patterns. For indicators such as unemployment which show strong seasonal patterns, seasonally adjusted data should be used to compare across periods (e.g. between March and June), while non-seasonally adjusted data can be used to compare between the same period across years.

More comprehensive information on the uses, definitions, and common misconceptions about labour market indicators can be found at https://stats.mom.gov.sg/Pages/Home.aspx