• Labor market remained stable

• Labor force and employment strengthened further

• Unemployment rate down to 3.5% in June

• Participation rate maintained at 70.0%

• Labor market continued to show positive trend

OVERVIEW

Malaysia's labor market labor market continues to show improvement as the unemployment rate registered a new pandemic low 3.4% in June with unemployed persons further reduced to 581.7 thousand persons. The number of labor force in June expanded by 0.2% to record 16.89mn persons. The number of employed persons continued to record a positive trend, with a month-on-month increase of 0.2% to 16.31mn persons. Meanwhile, June’s labor force participation rate (LFPR) was unchanged at 70.0%. Labor market remained stable supported by upbeat domestic economic momentum. Therefore, Malaysia's labor market in the upcoming months is expected to continue to grow steadily.

Employment. The number of employed persons in June continued to record a positive trend, with a monthly increase of 0.2% (+28.3 thousand persons) to 16.31mn persons (May: 16.28mn persons). In seasonally adjusted estimates, the number of employed persons rose by 0.5%. Likewise, year-on-year, the number of employed persons also posted an increase, with a rise of 2.3% (+371.5 thousand persons) as compared to June last year (15.94mn persons).

Out of the total employed persons in June, 75.4% were in the employees’ category, which posted a slight increase of 0.1% MoM or +11.2 thousand persons to 12.30mn (May: 12.29mn persons). On the same note, the number of own-account workers also continued to rise, with a surge of 0.5% or 13.5 thousand persons to 2.95mn persons (May: 2.94mn persons). The number of employed persons who were temporarily not working in June, decreased by 1.9% MoM or -1.6 thousand persons totaling 80.4 thousand persons (May: 81.9 thousand persons). On a yearly basis, this category lessened by 8.5% (-7.4 thousand persons) from 87.8 thousand persons in June last year. This group of persons, who were most likely not able to work temporarily, were not classified as unemployed as they have work to return to.

In terms of the economic sector, the services sector remained on an upward trend, mainly in food & beverage services; wholesale & retail trade; and transportation & storage activities. The number of employed persons in the manufacturing, construction, mining & quarrying and agriculture sectors also exhibited increases during the month.

During the month, the employment-to-population ratio which indicates the ability of an economy to create employment, held steady at 67.6%. The ratio increased by 0.7 percentage points from 66.9% recorded in the same month of the preceding year, signifying a positive advancement in the economy’s ability to foster gainful employment.

Unemployed. The number of unemployed persons during the month decreased further, with a reduction of 0.5% MoM or equivalent to 2.9 thousand persons, registering a lower number of unemployed at 581.7 thousand persons (May: 584.6 thousand persons). June’s unemployment rate edged down by 0.1 percentage points to 3.4% (May: 3.5%). In the meantime, on seasonally adjusted terms, the number of unemployed decreased by 3.1%, recording 3.3% of the unemployment rate. Similarly, the number of unemployed persons reduced further by 7.8% YoY or -48.9 thousand persons (June 2022: 630.6 thousand persons). The unemployment rate also declined by 0.4 percentage points as compared to 3.8% in June 2022

By unemployment category, the actively unemployed or those who were available for work and were actively seeking jobs, comprised 80.3% of the total unemployed persons. This category posted a decrease of 0.8% (-3.5 thousand persons) to 466.9 thousand persons (May: 470.4 thousand persons). From the total actively unemployed, 61.1% were those who were unemployed for less than three months, while 6.6% were those who were in long-term unemployment for more than a year. On the other hand, those who believed that there were no jobs available or were inactively unemployed registered an increase of 0.5% (+0.6 thousand persons) to 114.8 thousand persons (May: 114.2 thousand persons). This is expected to drop steadily in line with a recovery in affected sectors like services, particularly with the bullish tourist arrival.

Unemployment by Age Group. The unemployment rate for youth aged 15 to 24 years during the month, remained at 11.0%, recording 312.4 thousand unemployed youths (May: 11.0%; 313.0 thousand persons). In the meantime, the unemployment rate for youth aged 15 to 30 years declined by 0.1 percentage points to record 6.9%, with the number of unemployed youths at 446.8 thousand persons (May: 7.0%; 448.6 thousand persons).

Labor Force: The number of labor force in June strengthened further by 0.2% MoM (+25.3 thousand persons) to record 16.89 million persons (May: 16.86 million persons). The number of labor force based on the seasonally adjusted estimate, increased by 0.4%. Annually, the number of labor force rose by 1.9% (+322.5 thousand persons) as compared to 16.57mn persons in June 2022.

In terms of labor force by gender, the male labor force was 10.32mn persons (May: 10.30mn persons), while the female labor force was 6.57mn persons (May: 6.56mn person), both posting rises. Year-on-year comparison, both males and females labor force remained on an upward trend, recording an increase of 1.6% (June 2022: 10.16mn person), and 2.5% (June 2022: 6.41mn person) respectively.

Participation Rate. The labor force participation rate (LFPR) in June was unchanged at 70.0%. On seasonally adjusted estimates, the higher labor force registered a higher LFPR at 70.2%. Accordingly, year-on-year the LFPR went up by 0.5 percentage points as compared to June 2022 (69.5%). Males LFPR remained at 82.9% (May: 82.9%), whereas females LFPR went up to 56.3% (May: 56.2%). Year-on-year comparison, male and female LFPR also edged up by 0.3 percentage point from 82.6% and 0.7 percentage point from 55.6%, respectively

As for the inactivity group, the number of persons outside the labor force in June continued to reduce, with a marginal decrease of 0.02% to 7.23mn persons (May: 7.23mn persons). A similar trend was observed year-on-year, registering a reduction of 29.8 thousand persons (-0.4%) as compared to 7.26mn persons recorded in June 2022. The main reason for the outside labor force was housework/family responsibilities with 43.5%, followed by the schooling/ training category (39.9%).

OUTLOOK

Malaysia's labor market continued to improve with the unemployment rate reaching a new pandemic low of 3.4% in June 2023. A lower unemployment rate indicates a healthier job market and suggests that more people are finding employment opportunities. A declining unemployment rate can have positive effects on the economy. When more people are employed, household incomes tend to rise, which in turn can lead to increased consumer spending. This can further stimulate economic growth, as increased consumer spending drives demand for goods and services, ultimately benefiting various sectors of the economy. Additionally, a stable and growing job market can boost consumer confidence, encouraging people to spend more, which can have a positive impact on economic recovery and growth. On the other hand, Malaysia's trade momentum is anticipated to slow in the second half of 2023, due to the increasingly challenging global economic impact. External trade plays a significant role in the country's economy and can influence various sectors and employment opportunities. A slump in external trade performance could potentially have an impact on employment growth in Malaysia. Therefore, the labor market is also seen as facing hindrances due to the uncertain global economic condition and the labor force is expected to grow at a modest pace in the coming months.

Source: BIMB Securities Research - 11 Aug 2023