Mon, Mar 23, 2009 page12

• Unemployment likely rose again

  MORE TIME IS NEEDED Despite sudden positive signs, analysts said that rush orders and the stronger stock market were not signals of long-term economic recovery

  • By Crystal Hsu / STAFF REPORTER
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  The unemployment rate was expected to have climbed last month despite recent rallies in the local stock market and currency prices and rush orders from China, analysts said on Friday.

  Economic recovery is unlikely as long as unemployment remains high in the US and Europe, damping demand for Taiwanese consumer electronic products, they said.

  Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, said unemployment almost certainly went up last month and may have topped the 5.37 percent recorded in December 2001, the worst of the last recession.

  “Market consensus puts the unemployment rate at 5.6 percent for last month,” Hsiao said by telephone. “That’s a fair forecast. The upward trend is likely to persist in the first half, though the pace may slow down a little.”

  Unemployment was 5.31 percent in January and reached 5.33 percent after seasonal adjustment, the Directorate-General of Budget, Accounting and Statistics reported on Feb. 26.

  The statistics agency said the employment situation would deteriorate sharply last month after companies terminated short-term jobs created for the Lunar New Year holiday. The agency will release last month’s figures today.

  Several high-tech companies have recently obtained rush orders, which have helped ease the pressure to ask employees to take unpaid leave and improve factory utilization.

  Earlier this month, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chip maker, raised its first-quarter revenue and margin forecasts, mainly because of rush orders. The company announced on Friday it was ending its unpaid leave policy, starting on April 1.

  On Thursday, AU Optronics Corp (友達光電), the world’s third-largest liquid-crystal-display maker, said its utilization rate had improved and reached the higher end of its mid-50 percent target range, also thanks to rush orders.

  However, Hsiao said rush orders would provide no relief for the overall unemployment situation.

  “Companies will not hire new workers unless they’re sure we’re seeing an economic recovery,” he said. “That will not happen in the coming months.”

  Despite the government’s job-creation program, the unemployed population reached 578,000 in January, the highest since the agency began keeping statistics in 1978.

  Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc Taiwan, forecast unemployment last month will have risen 0.2 percentage points to 5.5 percent.

  Cheng said that while the manufacturing sector reported modest improvement in production thanks to rush orders, the service sector remained hard hit by slumping demand, with some companies shutting down.

  “The labor pool would have been smaller if the government had not introduced short-term jobs,” Cheng said by telephone. “Not all companies benefit from the rush orders and it is too early to assess their impact.”

  While Citigroup said unemployment would climb to 6 percent in the middle of this year, Cheng said the worst of the economic downturn was likely behind us in light of a slowing decline in exports.

  Still, he said, full recovery will only occur in the long-term.

  Exports fell 37.2 percent in the first two months of the year from the same period last year, compared with a 41.9 percent drop in December from the previous year, Ministry of Finance statistics showed.

  Standard Chartered Bank chief economist Tony Phoo (符銘財) said the number of people without jobs would not drop unless companies increased capital spending.

  Phoo said he had yet to see positive signs in the US or Europe, both of which are major consumers of electronics.

  Phoo joined other observers in saying that the recent wave of rush orders would result in short-term inventory restocking, but was not a sign of recovery in demand.

  “It would be naive to pin hopes of recovery on inventory building, a process that is different from sustained demand,” he said.
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