Malaysia’s labour market continued to improve with the unemployment rate declining to 4.1% in February 2022 from 4.2% in the previous month. Nevertheless, we still see structural challenges and a decreasing number of employed persons in certain sectors although positive factors such as the reopening of international borders and the government’s initiative will further support recovery in the labour market.

Highlights

• The unemployment rate declined from 4.2% in January 2022 to 4.1% in February 2022. Total unemployment shrank from 680.4 thousand to 671.8 thousand in February 2022, a 1.3% m/m contraction.

• Around 44,800 people were hired (or 0.3% m/m) in February 2022, bringing the total employment to 15.73 million. Meanwhile, the labour force participation rate (LFPR) remained unchanged at 69.1%.

• By status, 76.6% of them were employees (down from 76.7% in January 2022), 17.0% were own-account workers (up from 16.9%), 3.3% were employers (unchanged from 3.3%), and 3.1% were unpaid family workers (unchanged from 3.1%).

• Breaking down the figures, own-account workers recorded an increase of 18.6 thousand persons, larger than the 17.3 thousand increases in the employee category.

Key Takeaways

• The decline in the unemployment rate suggested that more people are returning to work as a result of the high vaccination rate and less stringent SOPs. By sector, there was more employment in the services sectors, particularly food & beverages, wholesale & retail, and transportation & storage.

• However, the agriculture and mining & quarrying sectors continued to record a reduction in employment, most likely due to the high dependency on foreign workers in these sectors.

• Employment in agriculture is expected to recover at a slower pace. This is because the reliance on foreign workers is still high while the adoption of automation remains low.

• Despite foreign workers being allowed to return to Malaysia, the approval rate is still low. Sectors affected are plantation, construction and selected manufacturing sectors. The Malaysian Employers Federation said that of 475,678 applications, only around 2,606 were approved as of 1 April 2022.

• We also need to note the inherent structural issues in Malaysia’s labour market with more people moving towards self-employment rather than being employed and the competition with foreign workers.

• On the bright side, the reopening of international borders is expected to boost employment in the tourism and tourism-related sectors. Sectors that will benefit include accommodation services, food and beverages, transportation, and travel agencies. Based on the DOSM’s figures, around 3.5 million workers are engaged in the tourism industry.

• Also, the labour market is also set to benefit from the government’s initiative laid out in Budget 2022. Overall, we expect the unemployment rate in Malaysia to decline to 3.9% in 2022, below Bank Negara Malaysia’s expectation of 4.0%.

Source: AmInvest Research - 11 Apr 2022