Structural unemployment, resulting from low-skilled workers failing to find jobs as industries move to higher-end production, is projected to worsen the unemployment landscape, the Manpower Ministry said in a report.

"As the economy transits to slower growth in 2005 amidst declining demand for electronics and high oil prices, new jobs will still be created but the pace of growth will be slower.

"Structural unemployment also remains a concern. It is therefore important for workers and wages to stay competitive and flexible so that they will be in a better position to respond to changing economic conditions."

The trade-reliant economy is officially expected to grow 3.0-5.0 percent this year, following the stellar performance of last year when unemployment fell to 3.7 percent as of December 2004 from 4.6 percent a year earlier.

Employment grew by 71,400 in 2004, wiping out job losses totalling 35,900 over the past three years, the report said.

The services industry was the largest source of new jobs with 54,700, followed by the manufacturing sector, where hirings posted the strongest annual gains in 16 years.

However, the report warned of the impact of companies relocating to lower cost centres or of workers losing their jobs as firms move up the value chain requiring specialised capabilities.

Half of the 10,191 layoffs in 2004 came in the services sector, the ministry said.

Manufacturing accounted for 44 percent of the job losses, mostly in the all-important electronics industry.

Government leaders have taken an increasingly cautious line on job creation recently, with Prime Minister Lee Hsien Loong this month warning of higher unemployment even as the economy grows.

Manpower Minister Ng Eng Hen also warned last week that fewer jobs would be created during periods of strong economic growth in Singapore because of the city-state's drive towards highly specialised industries.

He said that when the economy grew 8.0 percent in 1995 and 8.2 percent in 1996, 109,000 and 103,000 jobs were created respectively or more than 30,000 more jobs than during a similar expansion last year.

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