• Malaysia’s total labour force rise further in September

• Unemployment rate improved to 3.6% in September

• Participation rate remained steady at 69.7%

• The month’s unemployment rate already surpassed BNM’s full year target

OVERVIEW

Malaysia’s unemployment rate improved in September pushed by favourable job creation which reached above 500k against a year ago. That said, September’s unemployment rate of 3.6% was an improvement against August (3.7%) which is also convincingly better against 12-month high (September 2021: 4.5%) and COVID-19 peak (May 2020: 5.3%). Note that September’s achievement is also ahead of BNM’s 2022 projection of 4.0% which firmly renders the country the coveted full employment condition. Positively, Malaysia’s unemployment rate has been on a steady downtrend since full economic openings in April, a trend consistent with global and regional peers. The favourable job creation and hence, the unemployment rate is also in line with the government target to create at > 1mn employment this year (Budget 2022; SOCSO’s Jamin Kerja; GLiCs and GLCs). Under Budget 2023, the government is aiming to create more than 500k new employment, pushing the year’s unemployment rate to 3.5-3.7% and therefore, sustaining our full employment condition.

Labour Force: Malaysia’s total labour force expanded further in September, a YoY increase of 2.8% to 16.65mn workers, driven among others by full economic openings post COVID-19 pandemic, the easing of COVID-19 vaccine requirement, an increase in minimum wage (May 2022) and a steady return of migrant workers. Note that labour shortage issue is being addressed steadily by the government following the resolve to source migrant workers from 16 countries. On the same beat, Indonesia has lifted the freeze on migrant workers to Malaysia beginning 1st August 2022, paving the way for a gradual return of migrant workers to fill up the acute shortage of harvester and hence, the production oil palm sector in the near future. To recap, Ministry of Human Resource has given the approval for employers to source migrant workers from 16 countries including India, Thailand, Cambodia, Nepal, Myanmar, Laos, Vietnam, the Philippines, Pakistan, Sri Lanka, Bangladesh, Turkmenistan, Uzbekistan, Indonesia and Kazakhstan.

Employment. Job creation remained steady in September following the addition of 580k or a 118.0% YoY jump, a slowdown however against August numbers (+641k; +187% YoY). Cumulative job creation YTD is also a leap against the same period a year ago which may remain steady given minimal disruption from COVID-19 and full economic openings around the world. Unemployment rate is forecast to reduce further in the near term, likely to reach the pre COVID-19 level (April 2020: 3.3%) by end of the year which is impressive given that it is less than a year when the economy was fully open (April 2022).

Unemployed. A steady job creation drove the number of unemployed workers lower for the month which tanked by 125k YoY to 605k or a YoY decline of 17.1%. This is an improvement against the year’s high of 680.4k in January and a marked improvement against a year ago (September 2021: 730k). This is expected to drop steadily in line with steady recovery in affected sectors like services particularly leisure, accommodations and hospitality, tourism, the sub-sectors that borne the most brunt of the pandemic. It is also set to reach the pre COVID level of 525k in February 2020, projected to take place in 1-2 quarters. The bullish tourist arrival expected next year, to the tune of more than 15mn (versus 4-5mn in 2022), will also drive the number of unemployed lower.

Participation Rate. Labour participation rate remained remarkable after remaining steady at 69.7% in September, a steady rise against 68.6% from a year ago, signaling that the Malaysian population have been recovering well from the COVID-19 pandemic and therefore, a rebound in number of economically active population. This is among the highest in the world amid Malaysia that trails only Sweden (September 2022: 74.6%) and Netherlands (September 2022: 75.0%), if not the highest in ASEAN.

Unemployment by Age Group. Unemployment rate for youth by age group remained sticky however, including for the 15-24 years old (September 2022: 12.1%; September 2020: 13.9%) and 15-30 (September 2022: 7.1%; September 2021: 8.5%), suggesting that both groups were still recovering from the strong headwinds of COVID-19.

Source: BIMB Securities Research - 8 Nov 2022