• Unemployment rate rose to 4.9% in January
• The number of unemployed persons increased by 9.5k to 782.5k in January
• Total labor force changed with additional 31.5k persons to 16.02 million
• Labor force participation rate slightly increased to 68.5%
• Labor market to endure slow recovery

Employed persons continued to increase marginally 0.1% mom or 21.9k persons to 15.24m persons in January 2021 for the second straight month. Year-on-year comparison, the indicator continued with a downward trend for tenth consecutive months whereby the number of employed persons declined 0.5% during the month. The employment-to-population ratio which indicates the ability of an economy to create employment rose at 65.2%. Year-on-year, the employment-to-population ratio dropped by 1.5 percentage points from 66.7%.

The unemployment rate rose to 4.9% in January as compared to the previous month. The number of unemployed persons rose by 1.3% or 9.7k persons to register 782.5k unemployed persons. The unemployment rate for January was higher by 1.7 ppt year-on-year, with the number of unemployed persons registering an additional of 270.8k persons.

The labour force participation rate (LFPR) slightly increased to 68.5%. In line with this, the number of labour force changed over the month with an additional of 31.5k persons to record 16.02m persons. Year-on-year comparison, the number of labour force improved by 190.5k persons (Jan’20: 15.8m persons). In the meantime, when compared to the same month of the preceding year, the LFPR edged down by 0.4 ppt (Jan’20: 68.9%).

Job market deteriorated as the jobless rate accelerated.

Employment continued to increase marginally 0.1% mom or 21.9k persons to 15.24m persons in January (Dec’20: 15.22m persons) for the second month. By economic sector, employed persons in services persistently increased particularly in wholesale & retail trade, human health & social work, and education activities. The employment in manufacturing sectors remained its positive growth for the third month, while the construction sector also registered an increase. However, the agriculture and mining & quarrying sectors were constantly recording decline in employment since the past seventh month.

Employed persons in the employee’s category was the largest which comprised 77.7% of the overall employment. This category enlarged by 0.3% mom (+40.8k persons) to 11.85m persons. In the meantime, own-account workers comprising of 15.7%, continued to decrease for the four consecutive months by 0.4% to 2.39m persons in January. This group comprised mostly of daily wage earners working as small business operator such as small retailers; hawkers; sellers in markets and stalls as well as smallholders. The number of employed persons who were temporarily not working continued to increase to 158.9k persons as against December 2020 (146.2k persons) in line with the implementation of MCO 2.0 during the month. This group of persons, who were most likely not able to work was not categorised as unemployed as they had work to return to.

The unemployment rate rose to 4.9% in January 2021 while the number of unemployed persons augmented by 1.3% mom or 9.7k persons to 782.5k persons. Of these, 84.0% of the unemployed persons was the actively unemployed persons which was defined as persons who were available for work and were actively looking for work. This group registered an increase of 1.9% mom to 657.2k persons. Among the actively unemployed persons, the largest group was those who were unemployed for less than three months with a share of 48.9%. On the other hand, 10.5% or 69.3k persons were in long-term unemployment of more than a year. A total of 125.3k persons were registered as the inactively unemployed or discouraged group whom believed there were no jobs available, declined by 2.2% mom as compared to 128.2k persons in December.

In January 2021, the unemployment rate of youth aged 15 to 24 years continued to increase by 0.3 percentage points to 13.5% mom. Whereas, the unemployment rate for youth aged 15 to 30 years was 9.2% mom, rose by 0.5 percentage point (Dec’20: 8.7%).

The number of outside labour force continued to decrease for the second month of 6.0k persons to 7.37m persons as compared to December 2020. Whereas, outside labour force rose by 3.3% yoy (+237.3 persons). Among the main reason for not seeking jobs during the month was due to schooling/ training which comprised of 42.6% or 3.13m persons. This was followed by housework/ family responsibility with a share of 41.4% or 3.05m persons.

Labor market to endure slow recovery

Malaysia’s unemployment rate rose to 4.9% in January, the highest level since Jun 2020. During the month, the employed person increased 21.9k person, while the new entrant into labour force was 31.5k person compared to the previous month. Although the number of employed persons showed an improvement, the acceleration of additional labour supply had contributed to the increased in the jobless rate. This was due to high youth unemployment and decreased in the outside labour force registered during the month.

Meanwhile, global labour markets were mixed as the continued economic recovery contributed towards lower jobless rates. Meanwhile, with COVID-19 cases were on the rise at the end of last year, some countries registered higher unemployment rates as economic activities weakened following tighter restrictions to contain the pandemic. Jobless rates in many countries declined or unchanged in January as in the previous month, while still remaining relatively high compared to the pre-pandemic period.

Domestically, the labor market weakened due to re-introduction of tighter restrictions under MCO 2.0 in almost all states in Malaysia in order to control the record increase in COVID-19 cases. However, COVID-19 cases slowly decreasing, we foresee the labor market to recover in the coming months as more restrictions have been gradually eased allowing more businesses to reopen and resume operations. While we reiterate our view that the first half of this year will remain challenging for the labour market, we still expect the weakness in the labour market in the early part of 2021 to be temporary, and the job situation will improve going forward on the back of recovering economic activities.

With more vaccines rolled out and administered in the coming months, we expect the recovery in the labor market to continue as economic outlook is set to improve boosted by a higher sentiment. Nevertheless, there will be some restrictions in place to contain the spread of COVID-19 cases and this could slow down the recovery process before the labor market is able to return to pre-pandemic levels. With the less stringent measures of CMCO and RMCO, we expect the consumption would be better. Hence, the households are likely to spend more this year buoyed by various government supports through multiple stimulus and budget 2021. The improvements in demand would trigger the employer to hire more workers amid economic recovery.

Source: BIMB Securities Research - 9 Mar 2021