• Steady Increase in Workforce and Employment
   
• Unemployed Persons Sustained Its Downward Trajectory
   
• Unemployment rate stayed at 3.3%

• Participation rate remained at a record high of 70.3%

• Malaysia’s labor market is anticipated to stay stable in 2024

OVERVIEW

The strong performance of Malaysia's workforce prevailed well into May 2024, boosted by improved economic and business outlook. The labor force in May 2024 continued to strengthen, increasing by 0.1% to 17.15mn persons. Similar trend is seen in the number of employed persons as it ticked up by 0.1% MoM to record 16.58mn persons. Meanwhile, the number of unemployed persons sustained its downward trajectory, slipping by 0.1% YoY to 566.1 thousand persons. The unemployment rate held steady for the seventh straight month in May at 3.3% (Apr: 3.3%), maintaining its lowest since January 2020. The labor force participation rate remained stable at 70.3% in May.

In May, Malaysia's labor market remained stable, reflecting an enhanced ability to generate jobs. This is consistent with the ongoing improvements in the domestic economic climate and aligns with global economic growth trends.

The number of employed persons expanded by 0.1% MoM (+24.1k persons) to reach 16.58mn persons (Apr: 16.56mn). On a yearly basis, the number of employed individuals increased by 1.8% YoY or equivalent to +300k persons (May’23: 16.28mn persons). During the month, the employment-to-population ratio, a gauge of an economy's employment creation capability, remained steady at 68.0% (Apr: 67.9%). Comparatively, this ratio posted 0.4 percentage points growth from 67.6% in May 2023.

Across various economic sectors, the Services sector saw a continued increase in employment, particularly in Wholesale & Retail Trade, Food & Beverage Services, and Information & Communication activities. Similarly, the Manufacturing, Construction, Mining & Quarrying, and Agriculture sectors also recorded expansions in the number of employed persons during the month.

By employment status, most of the employment came from the formal sector (employees: 75.1%, employers: 3.6%), while the informal sector (proxied by own-account workers) accounted for 18.4% of total recruitment in April. The remaining 3.0% were unpaid family workers. Employment in the employees' category increased marginally by 0.1% MoM to 12.44mn persons (Apr: 12.43mn persons). Similarly, own account workers continued their growth trend, expanding by 0.3% MoM to 3.05mn persons (Apr: 3.04mn persons).

Meanwhile, the number of unemployed persons continues to decline, with a slight decline of 0.1% MoM to 566.1k thousand persons (Apr: 566.4k persons). May's unemployment rate remained at 3.3%, consistent with the previous month's figure. On an annual basis, the number of unemployed persons decreased by 3.2% (-18.5k persons) compared to 584.6k persons in May 2023. Accordingly, the unemployment rate dropped by 0.2 percentage points from 3.5% in the same month last year.

The youth unemployment rate (aged 15-24) eased to 10.5% in May after steadying at 10.6% for the past six consecutive months, recording the number of unemployed youths at 305.6k persons (Apr: 10.6%; 306.9k persons), while the unemployed rate for those aged between 15-30 years remained at 6.5% with 434.6k unemployed youths (Apr: 6.5%; 434.9k persons). In terms of the unemployment category, 79.8% were actively unemployed, meaning they were available for work and actively seeking jobs. This category saw a slight increase of 0.1% MoM, reaching 452k persons (Apr: 451.4k persons).

The labor force in May 2024 continued to strengthen, increasing by 0.1% MoM to 17.15mn persons (Apr: 17.12mn persons). The labor force participation rate (LFPR) was unchanged at 70.3% (Apr: 70.3%). On a yearly basis, the number of labor force grew by 1.7% YoY or equivalent to 281.8k persons (May’23: 16.86mn persons). Hence, the LFPR was higher by 0.3 percentage points from 70.0% in May 2023.

The number of persons outside the labor force recorded a slight decline of 0.003% MoM to 7.23mn persons (Apr: 7.23mn persons). On an annual basis, the number of outside labor force increased marginally by 0.1% from 7.23mn persons in May last year. The major composition of those outside the labor force was housework/family responsibilities, comprising 42.7%, while schooling/training ranked second with 41.4%.

High unemployment rates prevail across advanced economies

The U.S. unemployment rate rose slightly to 4.1% in June 2024 (May: 4.0%). According to ADP payroll data, the US private sector employment grew 150k in June (May: 157k), marking the lowest increase in five months. Canada’s unemployment rate grew to 6.4% in June (May: 6.2%). Conversely, Italy’s unemployment rate remained at 6.8% in May (Apr: 6.8%). Meanwhile, Japan's unemployment rate remained at 2.6% in May 2024, consistent for the fourth consecutive month and in line with market expectations.

OUTLOOK

Malaysia's unemployment rate persisted at 3.3% in May, marking its lowest since January 2020. The labor force participation rate maintained its record high of 70.3%, slightly exceeding the entire working-age population. We expect a stable labor market in 2024, driven by economic growth that promotes job creation and participation. The ongoing improvement in the country's leading index signals sustained economic growth for Malaysia, supporting expectations of labor market stability in the coming months amidst favorable economic conditions, domestic growth, and sectoral recovery. The unemployment rate is expected to remain at 3.3% this year, signaling near full employment. Despite optimism, geopolitical tensions, slow trade recovery, and cautious domestic policy reforms may affect stability and job creation.

Source: BIMB Securities Research - 11 Jul 2024