August’s unemployment rate improved to 4.6% after peaking at 4.8% in June and July.

We expect Malaysia's full-year unemployment rate to settle at 4.4% from 4.8% previously as the economy reopens with the labour market continuing to recover, albeit at a moderate pace.

Still, we need to remain cautious. Uncertainties surrounding new Covid-19 virus variants and business prospects could put a lid on job prospects. There is a need to look at the underemployed segment and those in the informal sector. It will take a few years, likely around 2023 for the country to reach an unemployment rate around the 3.3% pre-pandemic level.

A. Highlights

• The unemployment rate in August improved to 4.6% with the number of people unemployed reduced to 748.8K, influenced by the reopening of the economy.

• The number of employed persons in August 2021 rose by 81.8K to a record 15.38mil persons, with the employment-to-population ratio increasing to 65.2%, from 65% in July.

• The labour force recorded a healthy expansion of 0.3%, or 52.5K to 16.3mil persons. This caused the labour force participation rate (LFPR) to climb to 68.4%.

• Looking at economic sectors, we saw an upside in the food & beverages services, wholesale and retail trade, and human health & social work activities, but the downward trend remains in agriculture and mining & quarrying.

B. Key Takeaways

• We saw the unemployment rate peaking after improving from the 4.8% level for two consecutive months in June and July. This is possibly due to the easing of restrictions and gradual reopening of the economy coupled with the high vaccination rate that allowed more sectors to operate.

• We expect Malaysia's full-year unemployment rate to settle at 4.4% from 4.8% previously as the economic reopens with the labour market continuing to recover, albeit at a moderate pace.

• And now with 90% of the adult population vaccinated, we expect the economy to move into the endemic Covid- 19 phase by end-October. This will allow more sectors to be reopened with new Covid-19 norms being practised, reinforcing growth and labour market prospects.

• Still, we need to remain cautious. Uncertainties surrounding new Covid-19 virus variants and business prospects could put a lid on job prospects. There is a need to look at the underemployed segment and those in the informal sector. It will take a few years, likely around 2023 for the country to reach an unemployment rate around the 3.3% pre-pandemic level.
   

Source: AmInvest Research - 11 Oct 2021