The labour market is benefiting from the relaxation of restrictive measures that has lifted business activities in 3Q2020. Incoming economic data is supporting the trend. The most recent being the industrial production (IP) data. In September, the IP rose by 1% y/y which is the fastest expansion since July, underpinned by manufacturing.

On that note, the unemployment rate in September eased slightly to 4.6% from 4.7% in August – the lowest in five months. But there were fewer jobs created during the month, coming in at 39.6K (August: 80.1K). The slack could have been absorbed by those under the own-account workers category. This could mean that given the growing challenges in getting jobs, more are focusing on self-employment as a means to make ends meet.

While 3Q2020 should witness an improving economy with the GDP during this quarter expected show a slower contraction of between -2% and -3%, pressure would emerge in 4Q2020 as a result of restrictive measures following the rise in the numbers of new Covid-19 cases. And this is likely to add pressure on job creation. Using the official unemployment rate statistics, the unemployment rate should hover around 4.7%– 4.9% in 2020.

• In tandem with the improving business activities and consumer confidence following the relaxation of the restrictive movements, the labour market is seeing the spillover effect.
• This is reflected by the continued improvement of the industrial production (IP) data. In September, the IP rose by 1% y/y which is the fastest expansion since July this year from 0.2% y/y in August. It was largely supported by manufacturing (4.3% y/y,) offsetting the weak mining (-9.6% y/y) and electricity (-2.1% y/y) data.
• Manufacturing continued to be underpinned by exports and domestic activities. The E&E segment (9.8%) is seen benefitting from the pick-up in global semiconductor sales. At the same time, manufacturing is supported by domestic activities such as transport equipment and other manufacturers (4.5%), food, beverages and tobacco (4.9%), petroleum and chemical product (3.2%) as well as furniture and wood products (2.3%).
• On that note, the unemployment rate in September eased slightly to 4.6% from 4.7% in August – the lowest in five months.
• Despite evidence of improving business activities and lower unemployment, there were fewer jobs created during the month, coming in at 39.6K (August: 80.1K). The slack in labour market could have been absorbed by those who fall under the own-account workers category. This segment showed a continued rise in employment to 2.43mil from 2.42mil in September.
• This could mean that given the growing challenges in getting jobs, more are focusing on self-employment as a means to make ends meet. And this probably explains the drop in the number of those temporarily not working to 100.7K in September from 102K in August and youth unemployment (aged 15 to 30 years) to 13% from 13.7% in August.
• While 3Q2020 should witness an improving economy, with the GDP during this quarter expected to show a slower contraction of between -2% and -3%, pressure would emerge in 4Q2020 as a result of restrictive measures following the rise in the numbers of new Covid-19 cases. And this is likely to add pressure on job creation. Using the official unemployment rate statistics, the unemployment rate should hover around 4.7%–4.9% in 2020.

Source: AmInvest Research - 10 Nov 2020