Malaysia’s Jobless Rate Has Trended Downward But Still Above Pre-Pandemic Levels

Shell workers in Penang Port

Recovery of Malaysia’s labour market continued as the jobless rate descended to a new pandemic low of 3.7% in Jul-22. Underpin by robust domestic demand and external trade sector, labour force and employment growth hit new record highs.

Unemployment dropped further to its largest contraction rate ever recorded. In addition, the outside labour force was reduced, the largest negative rate ever registered. Robust growth in employment was notably driven by employers, self-account workers and unpaid family workers +14.1%yoy. The employee segment which represents 76.0% of total employment grew higher. With this upbeat labour market performance, MIDF is optimistic about stronger consumer spending from 2HCY22 onwards. Plus, the receding unemployment rate may lead BNM to consider further normalisation of OPR in the upcoming MPC meetings.

Moving forward, the research house opines Malaysia’s labour market to stay in the recovery trend as indicated by the job-vacancy rate hitting a new record high at 80.6% in Jun-22. As for the second half outlook, MIDF believes Malaysia’s economy to stay on an upward trajectory underpin by robust domestic demand, international borders reopening, the revival of construction projects, expansion of primary sectors amid elevated global commodity prices and steady external trade activities.

The number of job vacancies surged to a new peak at 508K. This reflects a strong recovery in domestic economic activities fuelled by robust local demand and continuous expansion in the external sector. Better take-up by high-skilled occupations such as Legislators etc., Professionals and Associate Professionals. By sector, the services sector share rose to 45.8%, the highest in 6 months. Construction sector booked 15.4%, close to a 3-year high while the manufacturing sector took another 31.7%. The steady rise in vacancy shares of the Services and Construction sectors reflects the impacts of domestic economic improvement including international borders reopening.

Even though the jobless rate in the US inched up, the rate still reflects the full-employment condition in the economy. Despite of energy crisis and inflation pressure, Euro Area and the UK still indicate upbeat job market trends. Across the globe, China’s jobless rate declined to a 6-month low at 5.4%, thanks to the easing containment measures while other Asian economies also saw a declining and low unemployment rate. However, MIDF opines weaker-than-expected global growth is about to kick in especially in 3QCY22 onwards due to tightening monetary policy in many economies and elevated inflationary pressure.

Jobless rate forecast is maintained at 3.8% for 2022. Labour market in Malaysia is expected to strengthen further in 2HCY22 underpin by upbeat momentum in the domestic economy and steady expansion in external sector. Underpin by domestic reopening and strong economic fundamentals, Malaysia’s unemployment rate is projected to trend lower this year to 3.8% in 2022 from 4.6% in 2021. However, the projected jobless rate is still higher than pre-pandemic.

Employment growth forecasted at +2.5% (2021: +2.0%) while unemployment to shrink by -15.0% this year (2021: +3.0%). As of 7MCY22, the jobless rate averaged at 4.0% while employment growth at +3.5%yoy and unemployment fell by -14.4%yoy.

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