• Labor force hit another record high

• The number of employed persons continue to increase

• Decline in the number of unemployed persons continues

• Unemployment rate steady at 3.4% in October

• Participation rate remained at 70.1%

• Mixed global labor market conditions

• Anticipation of better economic growth prospects in 2024 will stimulate stronger labor demand

OVERVIEW

The number of unemployed declined further in October to record 570.9 thousand persons, while the unemployment rate remained at 3.4%. The labor force increased by 0.1% MoM to 16.97mn persons, with a labor force participation rate of 70.1 %. The number of employed persons also rose by 0.2% MoM to 16.40mn persons. Maintain our unemployment rate forecasts of 3.5% for 2023 and 3.3% for 2024.

The labor market in October has further strengthened, reflecting the encouraging current economic activities, with a continuous increase in the number of employed persons, while unemployment is declining.

The improvement in the number of employed persons continued in October with a month-on-month increase of 0.2% (+28.1k persons) to register 16.40mn persons (Sep’23: 16.38mn persons). Meanwhile, the number of employed persons went up by 2.0% (+321.7k) year-on-year (Oct’22: 16.08mn persons). In the economic sector, there is a consistent increase in the number of employed persons in the services sector, notably in wholesale & retail trade; food & beverage services; and transportation & storage activities. On the same note, the manufacturing, construction, mining & quarrying sectors, as well as the agriculture sector also posted rises in the number of employed persons in October. The employment-to-population ratio which indicates the ability of an economy to create employment, was unchanged at 67.7% as in the preceding month. In comparison with one year earlier, the ratio increased by 0.5 percentage points from 67.2% in October 2022. The employees’ category which was the largest composition of the total employed persons with a share of 75.3%, posted a rise of 0.1% or equivalent to 15.0k persons to record 12.35mn persons (Sep: 12.33mn persons). Likewise, the own-account workers category continued to increase, with an addition of 0.4% (+10.8k persons) to 2.99mn persons (Sep: 2.97mn 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 in October 2023.

The number of labor force was on an upward trend in October, with an addition of 0.1% MoM to register 16.97mn persons (Sep: 16.95mn persons). The labor force participation rate in October 2023 was unchanged at 70.1% as in the previous month. As compared to October last year, the number of labor force recorded a rise of 290.6k persons (+1.7%) from 16.68mn persons. The LFPR escalated by 0.4 percentage points as against 69.7% in October 2022. The number of outside labor force during the month declined marginally by 0.02% (- 1.3k persons) to 7.24mn persons (Sep: 7.24mn persons). On a yearly comparison, the number of outside labor force increased by 0.005% or 0.3k persons (Oct’22: 7.24mn persons).

On the contrary, the number of unemployed persons in October continued its downward trend with a reduction of 0.5% MoM to 570.9k persons (Sep: 573.7k persons). The unemployment rate during the month remained at 3.4%. In yearon-year comparison, the number of unemployed persons reduced by 5.2% (- 31.1k persons) compared to 602.0k persons registered in October 2022. Accordingly, the unemployment rate decreased by 0.2 percentage points from 3.6% in October last year.

The unemployment rate for youth aged 15 to 24 years in October was 10.7%, with 313.3k unemployed youths (Sep: 10.6%; 310.1k persons). Meanwhile, the unemployment rate for youth aged 15 to 30 years fell by 0.1 percentage points to 6.6%, recording the number of unemployed youths at 439.6k persons (Sept: 6.7%; 440.0k persons)

Mixed global labor market conditions

Global labor market was gradually losing momentum as higher borrowing costs curb demand in the broader economy but for Asian countries a resilient economy supported by services sector has led to a sustained 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 150k in October while the preceding two months of jobs creation (Aug and Sep) was revised lower by a total of 101k. 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 146k 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 unemployment rate stood at 6.5% in October, unchanged from the prior month. The number of unemployed people rose by 48k from a month earlier to an eight-month high of 11.13mn. Meanwhile, the youth unemployment rate, measuring job-seekers under 25 years old, increased to an over one-year high of 14.9% in October, up from 14.6% in September. Japan’s unemployment rate was at 2.5% in October, compared with September reading of 2.6%. It was the lowest jobless rate since June, as the number of unemployed fell by 20k to 1.75mn, and employment decreased by 70k to 67.49mn.

China’s national surveyed jobless rate remained unchanged at 5.0%, the same as the previous month. The jobless rate in 31 large cities and towns edged down to 5% in October from 5.2% in the previous month. The unemployment rate in the Philippines fell to 4.2% in October. It was the lowest jobless rate since November 2022, as the number of unemployed persons came in at 2.09mn, down from 2.24mn in October 2022. On the other hand, employment was recorded at 48.7mn, up from 47.1mn in the same month of the previous year. 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 five 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. Recovery in the labor market remained in tandem with stable economic growth driven by the encouraging domestic demand. Thus, aggregate demand for labor increased, creating more job opportunities in the market. 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. Still, the record high labor force participation rate of 70.1% indicates that a significant portion of the population is actively engaged in the workforce. Going into 2024, domestic demand resilience, continued recovery in tourism activities and potential turnaround in external trade should help sustain job opportunities. As a result, the labor market is expected to sustain the improving growth momentum, backed by continuous enhancements in the domestic economy. Services sector was underpinned by private consumption resilience on the back of solid labor market conditions as well as continued recovery in tourist arrivals. Malaysia recorded 26mn tourist arrivals from January 1 to November 15 this year, higher than the revised tourist arrivals target to 19.1mn for this year (from 16.1mn previously). Tourist arrivals will continue to increase following the implementation of the 30- day visa exemption for travelers from China and India from December 1. The tourism sector is projected to pick up significantly next year, surpassing prepandemic levels in terms of international tourist arrivals due to better flight connectivity and the potential increase in visitors from India and China. Therefore, tourism arrivals in 2024 is projected to be more than the 26.1mn foreign visitors seen in 2019. The anticipation of higher tourist arrivals in 2024 will help Malaysia’s domestic-oriented activities and will continue to be supportive of labor market conditions and investments. This 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. Our jobless rate forecast for this year implies monthly jobless rate to largely move sideways during the course of 2023.

Source: BIMB Securities Research - 11 Dec 2023