• Unemployment rate slightly higher at 3.4%

• The number of unemployed persons increased 1.6% yoy to 516,000

• Employment expanded by 2.4% to 14,863,000; all-time high number of employments

• Labor force moderated to 2.3% to 15,379,000

• Labor force participation rate breached 68.5%; the highest rate ever recorded

• Robust performance of SMEs contributes to a higher job creation

Employment expanded by 2.4% yoy to 14.86m in June, slightly lower than the previous month’s figure (2.8%). Still, the number of employments in June reached the all-time high figure and outpaced last month’s number (14.85m). Likewise, the labor force eased to 2.3% yoy in June from 2.6% in the previous month. The number of labor force was also breached the new record as it stood at 15.38m in June as compared to 15.36m registered in May 2018. Furthermore, the labor force participation rate improved to 68.5% in June from 68.4% in May. Therefore, it marked the highest labor force participation rate ever recorded.

Jobs added in the labor market registered at 10.6k, more than four times lower than 49.5k posted in the preceding month. On the contrary, the number of unemployed persons increased by 1.6% yoy in June after falling for four consecutive months (May: -0.5%; Apr: -0.4%; Mar: -0.4%; Feb: -1.2%). As a result, the unemployment rate for June rose slightly higher to 3.4% yoy from a stable 3.3% recorded for four months in row.

Robust performance of SMEs contributes to a higher job creation

The unemployment rate in Malaysia stood at 3.4% in June 2018 after a stable 3.3% recorded for four consecutive months. Despite slightly higher unemployment rate, optimism in the labour market was reflected by the labour force participation rate (LFPR), which improved to 68.5% in June from 68.4% in May. We expect the overall health of the labour market to stay firm, supported by the steady economic outlook which we project at 5.3% in 2018.

Meanwhile, small and medium enterprises (SMEs) has vigorously contributed to a higher employment in Malaysia. Their contribution to GDP has increased to 37.1% in 2017 as compared to 36.6% registered in 2016. Furthermore, Malaysia’s SMEs GDP posted a robust growth in 2017 as it grew at 7.2% yoy and outperformed Malaysia’s GDP which only logged at 5.9%. The stellar performance in SMEs has led to a better job creation and healthy labour market in 2017.

The contribution of SMEs employment over total employment has shown an upward trend over the years. It increased to 66.0% in 2017 from 65.3% in 2016. The increase was triggered by the greater performance of employment in SMEs as compared to the momentum of national employment. Among all the major sectors in Malaysia, the largest contributor to the SMEs employment was the services sector and followed by manufacturing, agriculture, construction and mining and quarrying. Thus, the existence of SMEs is really crucial in Malaysia as it acts as the backbone in supporting the overall economy.

Moving forwards, we believe that the SMEs will continuously give contribution towards Malaysia economic growth specifically in driving a better room for labour market to remain healthy.

Source: BIMB Securities Research - 13 Aug 2018