• Labor market conditions remain stable

• Continuous increase in the number of employed persons

• The number of unemployed persons continues to decline

• Unemployment rate steady at 3.4% in September

• Participation rate remained at 70.1%

• Mixed global labor market conditions

• Challenges in the economy may slow the progress in reaching a technically full employment

OVERVIEW

Unemployment remained at 3.4% in September (Aug: 3.4%) on the back of sustained growth in employment (Sep: +2.0%; Aug: +2.1%) and labor force (Sep: +1.8%; Aug: +1.8%) given increases in jobs in services, manufacturing, agriculture, construction as well as mining & quarrying sectors as well as informal jobs which rose to a record high. Maintain our unemployment rate forecasts of 3.5% for 2023 and 3.4% for 2024.

The labor market remained in a positive growth trend with a marginal increase in the number of employed persons, while unemployment continued to decrease in line with the current economic developments. The number of employed persons continued to trend up in September 2023, with a marginal increase of 0.1% MoM (2.0% YoY) to 16.38mn persons. Meanwhile, the number of unemployed persons during the month posted a decline of 0.6% MoM (-5.2% YoY) to 573.7 thousand persons. On the same note, the unemployment rate in September 2023 remained unchanged at 3.4% as in the previous month. Therefore, the number of labor force continued to expand in September, with a month-on-month increase of 0.1% (1.8% YoY) to 16.95mn persons, registering 70.1% of the labor force participation rate (LFPR), as recorded last month. During the month, the employment-to-population ratio which indicates the ability of an economy to create employment remained at 67.7% as of August 2023. As for the year-on-year comparison, the ratio continued to rise with an addition of 0.5 percentage points as compared to the same month of the previous year.

The unemployment rate for youth aged 15 to 24 years declined to 10.6%, recording the number of unemployed youths at 310.1 thousand persons (Aug: 10.8%; 309.2 thousand persons). At the same time, the unemployment rate for youth aged 15 to 30 years decreased by 0.1 percentage points to 6.7%, with a total number of 440.0 thousand unemployed youths (Aug: 6.8%; 439.6 thousand persons).

Informal jobs/workers i.e., Own Account Workers (i.e., daily income earners working as petty traders, hawkers, food stalls operators as well as smallholders plus gig workers) has been rising since January 2021 (2.39mn), and reached a new high of 2.97mn in September 2023.

For the third quarter of 2023, the number of labor force was on an upward trend, with a rise of 0.6% to 16.82mn persons (2Q23: 16.73mn persons). Accordingly, the LFPR rose by 0.1 percentage points to 70.1% (2Q23: 70.0%). Moreover, the number of employed persons increased by 0.6% to 16.25mn persons during the quarter (2Q23: 16.15mn persons). Meanwhile, the number of unemployed persons decreased by 1.4% to 573.1 thousand persons (2Q23: 581.4 thousand persons). The unemployment rate in the third quarter of 2023 fell by 0.1 percentage points to 3.4% (2Q23: 3.5%).

Mixed global labor market conditions

The persistent monetary tightening by central banks saw a rise in jobless rate in developed economies but for Asian countries a resilient economy has led to a reduction in the unemployment rate.

The latest US Labor Market Report showed a slower than expected job creation month in October, due to manufacturing losses. The non-farm payrolls (NFP) came at 150,000 in October while the preceding two months of jobs creation (Aug and Sep) was revised lower by a total of 101,000. While the latest jobs creation disappointed, it was still the 34th consecutive month of job gains since January 2021. In addition, US unemployment rate unexpectedly inched higher to 3.9% in October as the number of unemployed persons increased by 146,000 to 6.51mn. Meanwhile, the labor force participation rate edged lower to 62.7% after steadying at 62.8%, for the previous two months. Unemployment in the Eurozone has increased from its record low, rising unexpectedly to 6.5% in September from 6.4% in August as high interest rates and a stagnating economy start to take their toll on the region’s job market.

China’s national surveyed jobless rate slipped to 5.0% in September (Aug: 5.2%), the lowest since November 2021 when it was at similar level. Similarly, the 31 large cities jobless rate fell to 5.2% from 5.3% in August. Japan’s unemployment rate fell to 2.6% in September from 2.7% in August with the number of unemployed people declined by 50,000 to 1.82mn while the number of employed persons stood at 67.87mn in September. The unemployment in Indonesia reached 7.86mn people as of August 2023 or equivalent to 5.32% of the total 147.71 million labor force. Although it continues to decline, the number and unemployment rate is still relatively higher compared to August 2019 or before the pandemic, which is 7.1mn people. The unemployment rate in the Philippines dropped to 4.5% in September as number of unemployed persons decreased by 234 thousand to 2.26mn, while employment rose by 90 thousand to 47.67mn.

OUTLOOK

Malaysia's unemployment rate remained stable at 3.4% for four consecutive month 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. Malaysian economy is anticipated to continue to grow at a moderate pace. Department of Statistics Malaysia (DOSM) advance GDP estimates show Malaysia’s GDP growth improved slightly to 3.3% YoY in 3Q23 (2Q23: 2.9% YoY). Domestic demand resilience, continued recovery in tourism activities and better performance in the upstream commodities sector offset the drag of external demand weakness on the manufacturing activity. Services sector was estimated to grow by 5.1% YoY underpinned by private consumption resilience on the back of solid labor market conditions as well as continued recovery in tourist arrivals. 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 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. Based on Budget 2024, various initiatives and allocations are provided to increase career opportunities, such as continuing the SOCSO Career Building Program to ensure that informal workers, especially those involved in the gig economy, have the opportunity to participate in career development programs and micro-credential skills training. In addition, the Bumiputera Youth Entrepreneurs Program (TUBE) and the TEKUN Belia Mobilepreneur Scheme to support the youth were also continued.

Malaysia’s economy remains resilient anchored by domestic-oriented activities and will continue to be supported by labor market conditions and investments. 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. Renewed external headwinds and uncertainties are expected to continuously take a toll on the global and domestic economy and in turn boding ill for the labor markets with lagged effects. The latest manufacturing PMI for Malaysia indicated that manufacturing firms held back employment for the sixth month in a row in October and at the fastest pace since June 2022 as a result of persistent demand weakness, lower workloads and staff resignations amid spare capacity. Our jobless rate forecast for this year implies monthly jobless rate to largely move sideways during the course of 2023.
 

Source: BIMB Securities Research - 9 Nov 2023