Jobs and Business Fluctuations

Holding a job is a central part of a fulfilling life. Yet, a nation’s ability to deliver a steady stream of good jobs is not a given. At independence, Singapore’s unemployment rate was close to 10 percent. It steadily declined to about three percent by the mid-1980s. Against this backdrop, the unemployment rate in Western Europe hovered around two to three percent in the 1950s and 1960s. Nevertheless, from the early 1970s, the unemployment rate gradually crawled upwards to reach double-digit levels by the mid-1980s. We would like to understand what forces brought down Singapore’s unemployment rate, without igniting inflationary pressures, and the future prospects for jobs.In 1985, the unemployment rate spiked upwards when Singapore entered a sharp recession. Subsequently, there were other recessionary shocks that caused a rise in layoffs — in 1998, 2003 and 2009 — and a rise in the unemployment rate although not to levels as high as in 1985. We would like to understand the nature of shocks that can produce economic recessions and the propagation mechanisms through which the economic shocks work to slow down the economy. The chapter then discusses the policy measures to tackle these recessions.