Financial News
Written by: Huang Jie
2020-10-22 08:00
Last update date: 2020-10-22 08:00
Cathay Pacific (0293) announced large-scale layoffs and will lay off about 5,300 employees in Hong Kong in the next few weeks. This action is equivalent to pushing up the unemployment rate by more than 0.1%.
Due to the delay in controlling the new crown epidemic and the government’s "job-protection" plan is about to come to an end, some scholars estimate that the unemployment rate will continue to deteriorate and will rise above the 7% level next year.
The latest unemployment rate in Hong Kong (provisional figures from July to September) increased by 0.3 percentage points to 6.4%, the highest level in the past 16 years; the number of unemployed increased by 11,500 to nearly 260,000; the underemployment rate remained at 3.8%, underemployed The number is 149,200.
The number of unemployed persons mentioned above does not take into account Cathay Pacific’s layoffs of 5,300 employees. If all of them are included, and assuming the labor force (approximately 3,884,600 people) remains unchanged, it is equivalent to pushing up the unemployment rate by more than 0.1 percentage point.
Li Zhaobo, senior lecturer at CUHK Business School, predicts that the unemployment rate will rise above 7% next year.
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Companies are expected to lay off employees after the "Ensure Employment" plan
In addition to Cathay Pacific's major layoffs, it is also necessary to pay attention to the fact that after the completion of the "Ensure Jobs" plan, there may be a new wave of layoffs.
The second phase of the plan received applications from more than 158,000 employers. According to the government’s announcement on October 7, the plan has so far granted wage subsidies to about 125,000 employers, promising about 1.33 million salaried employees.
The Secretariat of the Employment Guarantee Program stated at the time that nearly 80% of the wage subsidy applications for the second phase of the program have been processed, and the remaining approximately 36,000 applications will be approved as soon as possible.
After the government’s "Employment Guarantee" program ends next month, Li Zhaobo, a senior lecturer at the CUHK Business School, predicts that the unemployment rate will rise afterwards.
He said that the unemployment rate has risen by 0.3 percentage points recently. One of the main reasons is that some companies have given up on applying for the second phase of the employment insurance program and "started speculating."
As the second period of employment guarantee will expire, Li Zhaobo estimates that other companies will also start to lay off employees. The job market will definitely deteriorate next year. The unemployment rate is expected to rise to more than 7%. "If the epidemic continues, business will not improve during Christmas and New Year peak seasons, the company said. If you live, you will fire people."
Li Zhaobo believes that consumption and tourism-related industries will still be the worst-hit areas of unemployment if they are not closed for a day.
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Tourism-related industries continue to be hardest hit
Classified by industry, the unemployment rate of retail, accommodation and catering services soared by 0.8 percentage points to 11.7%, which was the highest post-SARS in 2003.
Among them, the unemployment rate and underemployment rate of the catering service activity industry reached 15.2% and 9.5% respectively.
In addition, the unemployment rate in the construction industry is also high at 10.9%.
Li Zhaobo believes that consumer and tourism-related industries will still be the hardest hit. He took the retail industry as an example. About 40% of his business came from tourists. Before the border was reopened, there was hardly any improvement. "The epidemic has delayed the recovery of the economy. Good "switches" in China and Hong Kong have been delayed again and again. Passengers will not return, and the retail industry will definitely deteriorate. It will not be dawning!" As for the aviation industry, the situation is equally difficult. To absorb so much labor, the laid-off employees may have to use reserves, and it will take two or three years for the market conditions to improve."
Looking at the data, the SARS peak was 8.5% in 2003. However, Li Zhaobo believes that this round of unemployment is unlikely to be so serious. "The Hong Kong economy was the first to bear the brunt, and the government did not know how to deal with it. Now there are guaranteed jobs and QE support."
Unemployment rate Lee Zhaobo Cathay Pacific Hong Kong Economy