• Unemployment rate dipped to 4.6% in August
• The number of unemployed persons reduced by 29.4k to 748.8k in August
• Total labor force changed with an additional of 52.5k persons to 16.13 million
• Labor force participation rate rose to 68.4%
• Job market conditions will continue to recover with the reopening of the economy

Employed persons rose by 0.53% mom or 81.8k persons to 15.38m persons in August 2021, a reversal of two straight months of decline. Similarly, on a year-on-year comparison, the indicator continued to post positive growth for the sixth straights month, whereby the number of employed persons rose 1.5% during the month. The employment-to-population ratio which indicates the ability of an economy to create employment picked up by 0.2 ppt to 65.2%. Year-on-year, the employment-to-population ratio remained flat at 65.2%.

The unemployment rate dipped to 4.6% in August as compared to the previous month. The number of unemployed persons reduced by 3.8% mom or 29.4k persons to register 748.8k unemployed persons. The unemployment rate for August was lower by 0.1 ppt year-on-year, with the number of unemployed persons increased by 7.2k persons.

The labor force participation rate (LFPR) rose by 0.1 ppt to 68.4% compared to the previous month. Meanwhile, the number of labor force changed over the month was higher by 52.5k persons to record 16.13m persons. Year-on-year comparison, the number of labor force improved by 230.3k persons (Aug’20: 15.90m persons). In the meantime, when compared to the same month of the preceding year, the LFPR remained flat (Aug’20: 68.4%).

Gradual economic re-opening boosted hiring in August

Employment rose by 0.53% mom or 81.8k persons to 15.38m persons in August (Jul’21: 15.29m persons), a reversal of two months of declined. By economic sector, employed persons in services rose in August, mainly in food & beverages services, wholesale and retail trade, and human health & social work activities. The employment in manufacturing sectors posted positive growth while employed persons in the construction sector also increase in the month. The agriculture and mining & quarrying sectors were constantly recording a decline in employment since the past fourteenth month.

Employed persons in the employee’s category was the largest which comprised 77.4% of the overall employment. This category increased by 0.24% mom (+27.9k persons) to 11.90m persons. In the meantime, own-account workers encompassed of 16.5%, grew by 1.4% to 2.54m persons in August. This group comprised mostly of daily wage earners working as small business operators such as small retailers; hawkers; sellers in markets and stalls as well as small holders. The improvement of employed persons in this category was partly due to the permission for the economic sector to continue their businesses during the National Recovery Plan (NRP) period and greater economic activities due to the transitions of several states into the next phases of NRP. The number of employed persons who were temporarily not working declined to 671.2k persons as against July 2021 (776.3k persons), reflecting the gradually eased of stringent containment measures. This group of persons, who were most likely unable to work was not categorised as unemployed as they had work to return to.

The unemployment rate dipped to 4.6% in August 2021, while the number of unemployed persons reduced by 3.8% mom or 29.4k persons to 748.8k persons. Of these, 83.8% 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 went down by 3.8% mom to 627.5k persons. Among the actively unemployed persons, the largest group was those who were unemployed for less than three months with a share of 53.8%. On the other hand, 9.0% were in long-term unemployment of more than a year. A total of 121.3k persons were registered as the inactively unemployed or discouraged group whom believed there were no jobs available, a drop by 4.4% mom as compared to 126.9k persons in July.

In August 2021, the unemployment rate of youth aged 15 to 24 years rose for the second month by 0.2 ppts to 13.9%. Whereas the unemployment rate for youth aged 15 to 30 years increased to 8.8% (Jul’21: 8.5%).

The number of outside labor force registered a reduction of 26.9 k persons to 7.45m persons as compared to July 2021. On the contrary, the outside labor force rose by 1.3% yoy (+97.0k persons). Among the main reason for not seeking jobs during the month was due to housework/ family responsibility with a share of 44.8% or 3.33m persons. This was followed by schooling/ training which comprised of 41.8% or 3.11m persons.

Job market conditions will continue to recover with the reopening of the economy

Labor market condition improved in August as Malaysia’s economy gradually recovered from the impact of full lockdown as states were allowed to transition to the next phases in the National Recovery Plan (NRP). Unemployment rate fell to 4.6% in Aug from 4.8% in Jul after more economic and social activities were allowed to resume since mid-Aug. The number of unemployed persons dropped for the first time since the re-introduction of MCO 3.0 in mid-May 2021 by -3.8% mom (Jul: +1.2%) with the number of individuals unemployed falling to 748.8k (Jul: 778.2k), the lowest since May. Meanwhile, unemployment was +223.6k above the pre-pandemic level (Feb '20: 525.2k). Total employment rebounded substantially by 81.8k to 15.38m persons (Jul: -2.7k to 15.29m persons), the highest level on record.

Since the pandemic onset last year, the government has persistently supported the labor market through various policies, including short-term labor income support. Unveiling wage subsidy program (WSP) as immediate relief measures was successful in delaying the massive labor layoff during movement control order (MCO) while retaining household income. Four wage subsidy programs had been introduced under stimulus packages and budget 2021, with the allocation reached RM24.5bn. Over RM18bn has been spent under WSP, which help retaining 2.9 million employees from losing their jobs throughout the prolonged MCO in 2020 and 2021. Meanwhile, a total RM928m of wage subsidy has been disbursed to 86,181 employers under the PEMULIH stimulus package, which had saved 948,504 jobs during the recent lockdown. The jobs losses had partially cushioned, but the layoff was inevitable as businesses facing the downturn. From May to July 2021, a total of 76.0 thousand persons lost their jobs.

Moving forwards, the re-opening of economic and social activities could be a positive catalyst to the labor market recovery. The nation’s adult fully-vaccinated rate will hit the government’s target of 90% very soon, after which interstate travel will be allowed and Malaysia will move into an endemic phase with new COVID-19 norms being practised. With the eased of restrictions, better business outlook and consumer sentiment are foreseen in the upcoming months, further uplifting the broad-based labor market recovery. Still, even with the reopening of the economy, the labor market will be facing uneven recovery, as near-term hiring in hard-hit sectors is likely to be gradual due to the prolonged demand and supply issues. While economy‑wide opening will ease the lacklustre labour demand, the challenges could persist in the labor market to cope with uneven sectors recovery and higher labor supply.

Overall, Malaysian’s labor market is set to recover, albeit uneven across different parts of the workforce. Reopening the economy will be the key economic growth, which will create additional employment in the market. The labor market recovery is projected to gain further momentum in the remaining months of 2021 and into 2022 as more businesses have been resuming their operation at a greater capacity since mid-August. The strictest lockdown was also lifted across the whole country. We expect the improving domestic spending will lead to better hiring in the wholesale and retail trade, while the growing external demand will support the employment outlook in the manufacturing sector. With all these auguring well for growth and labor market prospects and anticipating a continued recovery in Malaysia’s job market in 4Q21, we maintain an unemployment rate forecast at 4.4% for year end.

Source: BIMB Securities Research - 11 Oct 2021