Regional governments have managed to keep a lid on unemployment figures, but the real test for labour markets will be whether businesses can stay afloat.
That’s the latest from ANZ analysts Sanjay Mathur and Dhiraj Nim, who wrote in a report on Oct 6 that “recent corporate performance or survey data does not imply a steady return to normalcy anytime soon”.
Indeed, “the health of the corporate sector does not portend well for labour”, they said, citing “significant deterioration” in metrics such as profit margins and factory utilisation rates among listed companies in the Asia-Pacific region over the last two quarters.
“The plight of smaller corporates whose ability to withstand economic shocks of this order for even a single quarter is likely to be much worse.”
The analysts noted that regional headline unemployment has either not spiked sharply, as in Malaysia and Singapore, or was “short-lived” and ebbed, as in the Philippines.
But inconsistent data across markets may have masked job losses, with the report noting that “in Thailand, a retrenched factory worker is not classified as unemployed if he starts working in the agriculture sector for as little as one hour per week”.
ANZ also attributed the trend mainly to generous aid schemes such as wage subsidies. The ratio of fiscal support to full-time jobs lost was 0.45 times in South-east Asia.
“Not only will it be quite difficult to retract such support, but also that doing so prematurely will reinforce the vicious loop of low incomes, leading to low demand and vice versa, and stoke unemployment yet again,” the analysts concluded.