• A small rise in Malaysia’s total labour force in October

• Unemployment rate was unchanged at 3.6% in October

• Participation rate remained steady at 69.7%

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

OVERVIEW

Malaysia’s unemployment rate was unchanged in October no thanks to the increase in labour force and a slowdown in job creation. That said, October’s unemployment rate of 3.6% matched September’s numbers (3.6%) which is convincingly better against 12-month high (September 2021: 4.5%) and COVID-19 peak (May 2020: 5.3%). We highlight the fact that October’s achievement already surpassed 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). Note that 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 slightly in October, a YoY increase of 2.6% to 16.68mn workers (September 2022: 16.65mn), 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. 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. Labour shortage remains a bane for the full turnaround of key sectors particularly agriculture and services, though at a lesser extent for manufacturing. The shortage of harvester for agriculture has capped the full turnaround of palm oil and palm-based products, reflected in the less-than-inspiring 3Q22 oil palm yield growth which expanded a meagre 1.2% YoY.

Employment. Job creation remained steady in October following the addition of 526k or a jump of 3.4% YoY, a slowdown however against September numbers (+588k; +3.8% YoY). Cumulative job creation YTD is 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 pushed the number of unemployed workers lower for the month which shed by 103k YoY to 602k or a YoY decline of 14.6%.  This is an improvement against the year’s high of 680.4k in January and a marked improvement against a year ago (October 2021: 705k). This is expected to drop steadily in line with a recovery in affected sectors like services particularly leisure, accommodations and hospitality, tourism, the sub-sectors that borne the most brunt of the pandemic, particularly with the bullish tourist arrival which is forecast to reach more than 15mn in 2023 versus 4-5mn in 2022. It is also set to surpass the pre COVID level soon, projected to take place in 1-2  quarters.

Participation Rate. Labour participation rate remained impressive after steadying 69.7% in October (September 2022: 69.7%), an improvement against  68.8% from a year ago, signaling that the Malaysian population have been healing 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 (October 2022: 74.1%) and Netherlands  (October 2022: 75.1%), if not the highest in ASEAN.

Unemployment by Age Group. Unemployment rate for youth by age group remained elevated however, particularly for the age 15-30 following a  deterioration in percentage of unemployed to 7.4% (September 2022: 7.1%) no thanks to an increase in the number of unemployed to 476.9k versus 460.4 in  September. There was an improvement however for the age group 15-24  following unchanged unemployment rate of 12.1% in October thanks to the drop in the number of unemployed to 337.2k versus 339.1k in September. The lackluster employment numbers in the former requires urgent attention by the authorities particularly when inflation has started to bite and hence, the quality of living for the vulnerable group.

Source: BIMB Securities Research - 9 Dec 2022