It is an inconvenient truth that the present economic cycle is unlikely to follow a neat and predictable pattern. What everyone hopes, of course, is to see sustainable recovery taking hold this year and a steady return to pre-crisis levels of hiring and GDP. But even the most optimistic forecasters fall back on a series of caveats and provisos, knowing there could be further surprises in store as the global economy adjusts to the shocks of the past 18 months and the resultant changes.
More definite, at least, is the fact that most Hong Kong companies believe the worst of the recession is over. Their focus is on growth rather than cost cutting and layoffs. Plans for investment and recruitment are once again back on the table, translating into a generally more positive sentiment for most sectors. The broad aim is not just to perform "better than 2009", but to set sights considerably higher in the expectation that the crisis will indeed lead to new opportunities.
That is all good news. However, it is also important to remember that a solid and sustained recovery for Hong Kong ultimately depends on two crucial factors: job creation and exports. Consistent improvement on these fronts is essential for the overall economy to turn around. Other measures, from stock market indices to consumer confidence to new initial public offerings, can be used to gauge progress, but all are secondary indicators. What really determines the health of the economy is the ability to get people into jobs, allowing them to generate income for themselves and, by extension, for the wider community.
The extent to which job creation fell away last year is evident from the SCMP/admanGo survey of positions advertised in the six leading recruitment publications in Hong Kong. It shows that total job ads dropped from 248,095 in 2008 to 103,240 last year. Not surprisingly, there was a significant decline in every major sector. In trading, the number of jobs on offer slid from 19,162 in 2008 to 6,207, while the hotel, catering and restaurant sector went from 18,570 down to 7,081 for the same comparative period.
Just as starkly, isolating the total jobs advertised in the second quarters of 2008 and last year reveals a fall from 79,152 to 24,094.
The data does contain some more hopeful trends. The figure of 27,228 for the final quarter of last year was better than the 26,899 of the same period in 2008 and the second half of last year, with a total of 55,638 jobs was 16.9 per cent up on the 47,602 of the year's first half.
Using his own research to assess the prospects for recovery and new jobs, David O'Rear, chief economist for the Hong Kong General Chamber of Commerce, feels they will pretty much depend on one area.
"Trade is the key," he says. "It still accounts for two-thirds of the Hong Kong economy, so it is overwhelmingly apparent we have to get this moving again." He cautions against reading too much into various short-term statistics, especially if comparing them against last year's figures. Some people were quick to see positives, for example, in better than expected Chinese imports for a single month or re-stocking by overseas retailers low on inventory. This was understandable but, as things stood, it needs consistently higher demand in one of more of the major developed economies for Hong Kong to turn things around.
"Everything has fallen so far, so fast, it is not difficult to generate some growth in the first quarter," O'Rear says. "But it will take any one of the United States, Europe or Japan to show some kind of sustainable recovery for China [export] manufacturing and the Hong Kong machine to start moving again."
Chamber forecasts were for local GDP to go from a contraction of 3 per cent last year to plus 3 to 4 per cent real growth with minimal inflation this year. And, while Hong Kong's unemployment rate has dropped from 5.4 per cent to 4.9 per cent over the past few months, O'Rear is cautious about predicting its future trend. He points out that demographics and migration can have a significant impact on the size of the labour force. This means percentage rates are not necessarily the best reflection of the state of the underlying job market.
The sign to look for is growth in full-time jobs for local workers. Part-time and contract positions still tend to disguise the real situation, as does roles, say in construction or banking, going mainly to people from overseas.
O'Rear also notes the government is lining up six to eight major policy initiatives for later this year. These include competition law, the minimum wage, a trustees' ordinance, and the possibility of compensation limits in the finance sector.
"All these regulations coming through have the potential for derailing the recovery," he says. "Most have been thought about for five years or more, but [it might be better] to back up and take a more sober-minded approach."
Kelvin Lau, an economist for Standard Chartered Bank, says business sentiment is strengthening, but areas of concern remain. Principal among these are how exit strategies, needed to end fiscal stimulus packages, will play out, and the still anaemic export demand. Both could lead to further volatility in financial markets with a ripple effect on employment.
"In general, economies in Asia will continue to see domestic consumption as a key driver for growth," Lau says. "This will contrast with the main overseas markets where the weak consumption story will prevail. Consumers in the West will have to scale back spending to rebuild their household balance sheets."
It is advisable, Lau says, to take numbers suggesting anything different with a pinch of salt. Short-term stock replenishment, for instance, does not mean a pick-up in end-user demand or tell much about the long-term economic cycle.
In view of this, Lau expects only gradual improvement for Hong Kong's job outlook this year. Some sectors, such as finance, retail, real estate, tourism and construction, look more encouraging. However, the speed of hiring will not accelerate significantly until firms see healthier profits or a gilt-edged chance for competitive gain.
"You need economic activity before you have jobs," says Qu Hongbin, HSBC's chief economist for China, adding that Hong Kong's hopes for recovery are largely tied to a pick-up in exports.
The mainland can expect to achieve a GDP growth rate of 9.5 per cent for the full year by taking further measures to boost domestic consumption. Indeed, this year will see a shift in central government spending from construction to consumption in a bid to reduce export dependence and create a more balanced economy. This will lead to rising private consumption, with a focus on durables, home appliances and communications, and more investment in services, education and health care.
"Domestic demand will be the key driver going forward," Qu says. "Any move up or down in exports is then the swing factor, not the fundamental factor for the economy." Overall, Hong Kong is still in a strong a position to benefit. Monetary stimulus has created plenty of liquidity for local financial markets, and initiatives based on cleaner industries, new energy, and technology are taking off on the mainland. Job creation depends on reacting to these changes, rather than assuming previous trade patterns will resume and that volumes return to previous levels.
"There are surprises ahead," Qu says. "Not all of them will be pleasant."
Analysts are wary of proclaiming a recovery despite initial signs pointing to a turnaround
The feedback from different sectors bears out the assessment that there's no room for complacency. Caution is the watchword, with industry leaders and recruitment specialists still braced for challenges
Manufacturing and logistics
The number of job advertisements placed by the manufacturing sector dropped from 17,010 in 2008 to 5,082 last year, according to the SCMP/admanGo survey. The immediate cause was the dramatic fall-off in orders from overseas, which hit in the final quarter of 2008. Fortunately, the past few months have seen initial signs of a turnaround, but no one is yet counting their chickens.
"Generally, the sentiment is still cautious," says David Wong, chairman of the Chinese Manufacturers' Association of Hong Kong, which has roughly 3,000 members across 29 industries from jewellery to toys and chemicals. "There is a lot of wait and see because [buyers] don't place their orders until the last minute and there are more fluctuations in order size." He adds that manufacturers also face an anxious wait to find out how governments around the world will unwind their financial rescue packages. At this stage, there is no way of knowing if private sector investment will take up the slack and spur further consumption.
"Basically, we are looking for a steady recovery, not strong, with single digit export growth," he says.
Comments from Peter Wong, chairman of the Hong Kong Association of Freight Forwarding and Logistics (Haffa), bear that out. He notes that freight rates for both sea and air shipments have increased. It would be unwise, though, to read too much into this. The increase is more a function of reduced capacity on major routes than of significantly higher cargo volumes.
"The majority of people think it will be quite a good year for logistics because the economy is picking up and store inventories in Europe are low," Peter Wong says. "But it is no secret; eventually the Hong Kong logistics will slow down. People may learn [the business] here and then go to work in China." In the meantime, local companies are likely be hiring customer service, operations and information technology staff, who understand the technicalities of the business.
Banking, finance and investment
After a period when survival was the priority, the mood is much more upbeat, with hiring back in fashion.
"Banks cut back quite heavily to get their cost base down, but they were pretty active for recruitment in the second half of 2009," says Guy Day, Ambition's managing director for Asia. "That activity is likely to continue for the foreseeable future."
He says that this is mostly replacement hiring to make good shortfalls in resources where cuts have been too deep. No one can yet talk of net job creation. Even so, if initial public offerings and general deal-making remain strong, there will be a flow-through effect to back-office hiring, and areas such as accounting and insurance.
"Recruitment is very much a sentiment driven thing, so when institutions see positi