"We see the unemployment rate continuing to improve modestly, falling to six percent by mid-year," said Joseph Lau, an economist at Credit Suisse First Boston. "But the economy is likely to slow this year and that will hit job creation."
The unemployment rate has gradually declined to 6.5 percent by October-December from a record 8.6 percent in summer 2003 as the economy rebounded, but it is still one of the highest among developed economies in Asia.
A median forecast of a Reuters survey of nine economists showed the jobless rate was stable at 6.5 percent on a seasonally adjusted basis in the three months through January. However, a few economists saw it edging up to 6.6 percent, citing a sharp increase in the number of job seekers.
Hong Kong's economy grew by at least 7.5 percent in 2004, according to a government estimate. The Hong Kong Monetary Authority, the territory's de- acto central bank, said this week it expected growth to slow to 4-5 percent in 2005.
The trade sector is seen slowing on the back of weakening global economic growth but consumer spending should remain robust, analysts say.
A rebound in consumer spending, helped by a booming tourism sector, has created jobs in the retail and hospitality industries.
Job creation in the past year has pushed employment up to record levels.
But the abrupt closure this week of seafood restaurant chain Hang Ho Seafood, leaving more than 200 staff with unpaid wages, was a blunt reminder that not everyone is benefiting from the stronger economy.
The restaurant chain catered to lower-income groups whose pay continues to fall in contrast to the many white collar workers who can look forward to salary hikes this year.
As manufacturing jobs have shifted to lower cost mainland China, the territory has an oversupply of low-skilled workers who are likely to keep the unemployment rate above five percent into next year at least, analysts say.