Why Hong Kong's unemployment rate climb is almost unstoppable

Despite an expanding labor force.

The seasonally-adjusted unemployment rate for August came in at 3.3%, same as that in July, with both the size of the labor force and employment reached record highs.

According to a research note from DBS, despite concerns about China's slowdown and its subsequent impact on Hong Kong's economic growth, the unemployment rate will not climb easily.

Since July 2011, the unemployment rate has stayed at or below 3.5%.

Here's more from DBS:

This is despite: 1) GDP growth has fallen below trend (4.5% YoY to just 1.6% in 2012; 2.9% in 2013 and 2.2% in 1H14; and 2) Retail sales values contracted from a year ago from Feb-Aug 2014.

The resilience is due to the fact that while the labor force is expanding by just around 1% per year, the demand for labor is likely to be expanding much faster.

While the supply of labor is mainly determined by local demographics, it is actually catering for both the demands of locals and those of mainlanders.

And we are not just referring tourism-related sectors - a wide range of industries are either directly or indirectly serving the demands of mainlanders.

That is why there are labor shortages in various sectors despite sluggish economic growth.

The unemployment rate is likely to fluctuate within a narrow range for the rest of the year.