However, analysts said they still expected the longer-term trend to show unemployment rates falling as companies increase hiring later in the year.

Analysts in a Reuters poll had expected the seasonally adjusted jobless rate to fall in the second quarter to 2.5 percent from 2.6 percent in the first quarter.

"Things are cooling somewhat on the employment front. We don't expect a severe deterioration, just a lull," said Sim Moh-Siong, a Citigroup economist, adding that 2.9 percent was still fairly low.

The rise in unemployment comes after other data showed growth in the trade-dependent economy slowed sharply in the second quarter to an annualised rate of 1.1 percent from a 7 percent pace in the first quarter.

The Ministry of Manpower said a rise in the labour supply led to the increase in the jobless rate, although it did not provide any quarterly figures on this.

However, it said labour supply -- citizens plus permanent residents -- in the first half of 2006 was 37 percent higher than a year earlier.

Singapore's unemployment rate -- the lowest in Asia after Thailand -- was 2.6 percent in the fourth quarter of 2005 and the first quarter of 2006. Those rates were the lowest since a 2.2 percent level five years ago.

The preliminary second-quarter data showed employment rose on a seasonally unadjusted basis by 36,500, less than a 45,000 increase in the first quarter, which was the biggest rise in more than a decade.

Singapore's services sector, which provides about 70 percent of the country's jobs, added 24,200 new hires in the second quarter, below 28,000 in the first quarter.

Manufacturers, which provide 20 percent of jobs, added 8,300 against 11,100 in the first quarter.

Economists said the tech cycle had lost some momentum. In addition, Maxtor Corp. cut some 900 jobs in Singapore following its acquisition by competitor Seagate Technology .

Analysts said they expected Singapore to absorb the expansion of the labour pool.

Gary Lazzarotto, Asia chief executive officer at Hudson Global Resources, told Reuters more companies were expecting to increase hiring in the third quarter, especially in wealth management, information technology, accounting, and logistics and supply chain management.

"The general confidence level in these industries is very strong," he said.

Some 56 percent of Singapore-based firms expect to hire in the July-to-September period, up from 52 percent in the second quarter, he said.

Lim Su Sian, an economist at DBS Bank, said longer term, the unemployment rate would trend lower.

"Activity in the service and construction industries will kick in as we head into 2007, even if manufacturing cools," she said.

Singapore wants to boost employment in the services sector as it loses an edge in manufacturing to lower-cost centres such as China and Vietnam.

The construction industry, which accounts for about 10 percent of all jobs, added 4,000 jobs in the second quarter.

Singapore plans to open two casinos to lure more tourists and wants to be a conference centre, partly to boost retail sales.

(Additional reporting by Fayen Wong)

                                                      Home