According to the Department of Statistics employment report released last week, the labour market remained resilient in May, with the unemployment rate holding steady at 3.0% for a second consecutive month as sustained hiring across key sectors continued to support employment growth.
In assessing the report, research house Kenanga said the data points to continued stability despite lingering geopolitical uncertainties and global economic headwinds, reinforcing expectations that domestic demand will remain the key driver of economic growth in the second half of 2026.
The number of unemployed Malaysians rose marginally by 0.3% month-on-month to 513,400 in May from 511,800 in April, representing a slower increase than the previous month’s 0.6% growth.
Among them, actively unemployed individuals — those available and actively seeking work — edged up 0.2% to 408,000, while continuing to account for 79.5% of total unemployment.
Employment expands for fourth straight month
Employment continued to grow at a steady pace, increasing 0.1% month-on-month for the fourth consecutive month.
Kenanga noted that the services sector remained the primary engine of job creation, driven by wholesale and retail trade, accommodation and food and beverage services, as well as information and communications activities.
Employment also recorded gains across the manufacturing, construction, agriculture, and mining and quarrying sectors, reflecting broad-based labour demand.
By employment status, the number of employees remained broadly unchanged after a modest increase in April, while growth among own-account workers eased to a four-month low.
The number of employers continued to expand modestly, while unpaid family workers declined for a third consecutive month.
Labour force participation remains at record high
Malaysia’s labour force participation rate (LFPR) remained at a record 70.9% for the fifth consecutive month.
The labour force expanded 0.1% to 17.34 million people in May, while the number of individuals outside the labour force edged slightly higher to 7.10 million, ending five consecutive months of decline.
Kenanga said the data reflects continued confidence among Malaysians in securing employment opportunities despite external uncertainties.
Layoffs rise but vacancies remain healthy
The research house acknowledged that job losses have begun to trend higher.
Data from PERKESO’s MYFutureJobs portal showed loss of employment (LOE) cases increased to 8,100 in June from 7,766 in May, exceeding the 2025 monthly average of 6,237 cases.
As of July 3, recorded layoffs had already reached 1,714, suggesting further increases could be reported during the month.
However, labour demand remained healthy, with active job vacancies rising to 109,739 at the end of June from 107,439 in May.
Although successful job placements declined to 10,591 from 14,366 previously, Kenanga said the higher number of vacancies continued to absorb part of the increase in layoffs, indicating that labour market conditions remain fundamentally resilient even as labour tightness has eased from earlier highs.
Domestic demand to underpin growth
Despite concerns over geopolitical tensions in the Middle East and their potential impact on energy prices and global supply chains, Kenanga believes Malaysia’s labour market remains sufficiently robust to support household spending and broader economic activity.
The research house maintained its 2026 unemployment rate forecast at 2.9%, compared with 3.0% in 2025, citing easing geopolitical tensions and stronger domestic demand as factors that should continue supporting hiring during the second half of the year.
Against this backdrop, Kenanga has revised its 2026 GDP growth forecast higher to a range of 4.5% to 5.0%, from its earlier point forecast of 4.5%, with domestic demand expected to remain the principal driver of Malaysia’s economic expansion through the remainder of 2026.
