• Labor market continues to remain stable

• Continuous increase in the number of employed persons, while the number of unemployed persons continues to decline

• Unemployment rate steady at 3.4% in August

• Participation rate remained at 70.1%

• Global labor market conditions remained robust

• Challenges in the economy may pose some constraints on the pace of job market improvement

OVERVIEW

Unemployment rate steadied at 3.4% in August (Jul: 3.4%) amid steady growth trends in employment (Aug: +2.1% YoY; Jul: +2.2% YoY) and labor force (Aug: 1.8% YoY; Jul: +1.9% YoY) thanks to jobs increases in services, manufacturing, agriculture, construction as well as mining & quarrying sectors.

The labor market remained stable in August with continuous increase in the number of employed persons, while the number of unemployed persons continued to decline. Unemployment rate remained at 3.4% in August for the third month amid steady growth momentum in employment (Aug: +2.1% YoY; Jul: +2.2% YoY) and labor force (Aug: 1.8% YoY; Jul: +1.9% YoY). The number of employed persons in August was on an increasing trend, with a rise of 0.1% MoM to 16.35mn persons while the number of labor force improved further, with a 0.1% MoM increase to 16.93mn persons. On the contrary, the number of unemployed persons in August continued to decline, with a decrease of 0.3% MoM to 577.3 thousand persons. August’s labor force participation rate stood at 70.1% as of July 2023.

The unemployment rate for youth aged 15 to 24 years continued to edge down by 0.1 percentage points during the month to 10.8%, registering a lower number of unemployed youths at 309.2 thousand persons (Jul: 10.9%; 311.2 thousand persons). However, it still above the pre-pandemic low of 9.9% in December 2019. In the meantime, the unemployment rate among youth aged 15 to 30 years stood at 6.8% as in the previous month, with 439.6 thousand unemployed youths (Jul: 6.8%; 444.8 thousand persons).

Global labor market conditions remained robust. Despite persistent monetary tightening by central banks, labor market conditions in most countries remained robust in 2023. The latest US Labor Market Report pointed to a resilient US employment market. Job creation was at 336,000 in September while the change in total nonfarm payroll employment for July & August were revised higher by 119,000. Jobless rate stayed at 3.8% (same as August), highest since February 2022 as unemployed numbers were little changed, and participation rate held at 62.8%. Unemployment rates continue to decrease in Eurozone as the unemployment rate fell to 6.4% in August, the lowest on record, from an upwardly revised 6.5% in July. The unemployment rate in Japan was 2.7% in August, unchanged from the figure in July, as the unemployment rate is less sensitive to fluctuations in economic activity due to the structure of corporate governance and it remained below 3% since mid-2021. China's surveyed urban unemployment rate inched down to 5.2% in August from 5.3% in July and the 31 large cities jobless rate similarly dropped to 5.3% from 5.4% in July. A decline in the global unemployment rate is indeed a positive indicator for the global economy, suggesting that economic activity is picking up, and there is progress in the post-pandemic recovery.

OUTLOOK

Malaysia's unemployment rate remaining stable at 3.4% in August is generally a positive sign and indicates that the labor market is holding steady and that there is a degree of job market resilience. However, the pace of improvement has turned more gradual as the jobless rate inches closer to its pre-pandemic level of 3.3% recorded in 2H19. The record high labor force participation rate of 70.1% indicates that a significant portion of the population is actively engaged in the workforce. This can be a sign of demographic growth and a potential source of economic strength, as it provides a larger pool of potential workers. Looking ahead, the global economy is expected to grow at a slower pace in 2H23 and hence, the Malaysian economy is anticipated to continue to grow at a moderate pace as well, due to slower external demand, which is seen as continuing to affect economic activities, especially in export-oriented sectors. However, the near-term economic outlook for Malaysia is expected to improve modestly, despite uncertainties in the global economic landscape. Malaysia's economic growth will also be supported by domestic demand and a favorable labor market position, particularly in domestically oriented sectors. Job market remains in good shape as reflected in continuous positive growth in employment, the decline in unemployment and lower jobless rate. The catalysts that will help to cushion the impact from external headwinds includes gradual recovery in tourism activity, an expected upturn in global tech cycle, sustained foreign direct investment inflows, ongoing infrastructure jobs, and a continuation of government measures to support the labor market. Malaysia’s economy remains resilient anchored by domestic-oriented activities and will continue to be supported by labor market conditions and investments. The labor market conditions, particularly employment and wages, have continued to improve, supporting households’ ability to spend. The expansion of employment opportunities means that more people are finding jobs, which is a crucial factor in improving living standards and reducing unemployment. It can also contribute to economic growth by increasing the productive capacity of the economy. The anticipation of moderate growth in Malaysia's labor market suggests that job opportunities may continue to expand in the coming months. However, it's noted that challenges in the economy may pose some constraints on the pace of job market improvement. Our jobless rate forecast for this year implies monthly jobless rate to largely move sideways during the course of 2023. We expect the government to unveil more job measures and progressive wage policy during the tabling of the national Budget 2024 on 13 October.

Source: BIMB Securities Research - 11 Oct 2023