Economics – Malaysia Macro

January’s unemployment rate was unchanged at 4.2%, (4.2% in December 2021), the lowest level since March 2020 when the pandemic began. The labour market trend improved as was due to a higher number of self employed compared to jobs created by organisations and companies.

While the unemployment rate is improving and could reach 3.8% in 2022, underlying structural labour market issues remain and these still need to be addressed.

Labour market improves but structural issues remain

Highlights

• January 2022’s unemployment rate came in at 4.2%, (4.2% in December 2021), the lowest level since March 2020 when the pandemic started. The improving labour market trend was due to a higher number of own-account workers compared to jobs created. Thus, the number of unemployed persons fell by 7.3K or 1.1% m/m to 680K persons (December 2021: 687K persons).

• The labour force participation rate in January was 69.1% compared to 69.0% in December 2021.

• Despite a drop in overall unemployment, youth unemployment (aged 15 to 24 years) remained high. Although it only accounted for 2.2% of the labour force, this segment of unemployment stood at a high double-digit of 13.2%.

Key Takeaways

• An interesting point to note in our labour trend is that more people are moving into self employment. Using the number of own-account workers as a proxy for self employment, this segment grew by 0.6% or 16.0K persons to 2.66mil persons. They make up 16.2% of the labour force.

• A telling point from the high number of own-account workers is that job openings in organisations and companies may not be as rapid as what is being envisaged based on the headline unemployment data. It is not surprising as many companies are still reeling from the pandemic impact and yet to operate at full capacity.

• Besides, the increasing level of uncertainties, the growing trend towards automation and advancement of technology, downsizing and relocation are other factors that could have contributed to slower job openings.

• Added with loss of jobs due to the pandemic plus the ongoing mismatch between supply and demand of labour as well as jobs taken up by foreign workers (legal and unregistered), locals are trending towards self-employment and openings in the gig economy.

• And the challenge of being self-employed, especially opening micro businesses amongst others, is the competition with foreign workers. They too are involved in micro businesses and are seen to be aggressively cutting prices vis-a-vis local business operators. Should this trend continue without any form of regulation, local self-employed businesses will suffer.

• While the unemployment rate is improving and could reach 3.8% in 2022, underlying structural labour market issues remain and still need to be addressed.

Source: AmInvest Research - 10 Mar 2022