• Continuous growth in labor force pushes LFPR to 70.4%.
• Malaysia’s labor market shows strength in 1H2024.
• Stable expansions in workforce and employment.
• Unemployed persons remained on a declining trend.
• Unemployment rate maintained at 3.3% since November last year.
• Malaysia’s robust labor market is anticipated prevail through 2H2024.

OVERVIEW

Malaysia's workforce remained robust throughout the first half of the year following the solid landscape seen in June 2024, boosted by the strong momentum of the economic and business outlook. The labor force in June 2024 continued to strengthen at the same pace of 0.1% to 17.17mn persons. Furthermore, the number of employed persons rose by 0.2% MoM to record 16.61mn persons. Meanwhile, the number of unemployed persons favorably sustained its downtrend, slipping by 0.1% MoM to 565.3 thousand persons. The unemployment rate held steady for the eighth straight month in June at 3.3% (May: 3.3%), maintaining its lowest since January 2020. A key highlight of the month is the labor force participation rate marking a historic high of 70.4%.

In June, Malaysia's labor market displayed a continuous improvement, reflecting the strong economic fundamentals of the country. The robust job market landscape aligns with the solid domestic economic growth expected from 1H2024, signaling the job market’s prominence is bolstering the economy.

The number of employed persons expanded by 0.2% MoM, slightly higher than the 0.1% rise recorded for the past three straight months, to reach 16.61mn persons (+25.8k persons) from May’s 16.58mn persons. On a yearly  basis, the number of employed individuals increased by 1.8% YoY or equivalent to +297.9k persons (June 23: 16.31mn persons). During the month, the employment-topopulation ratio, a gauge of an economy's employment creation capability, remained steady at 68.0% (May: 68.0%). Comparatively, this ratio posted 0.4 percentage points growth from 67.6% in June 2023.

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

By employment status, most of the employment came from the formal sector (employees: 75.0%, employers: 3.6%), while the informal sector (proxied by own-account workers) accounted for 18.4% of total recruitment in June. The remaining 3.0% were unpaid family workers. Employment in the employees' category expanded slightly by 0.1% MoM to 12.46mn persons (May: 12.45mn persons). The number of employed persons of the own account workers category rose by 0.3% MoM to 3.06mn persons (May: 3.05mn persons).

Meanwhile, the number of unemployed persons edges down by 0.1% MoM, at the same pace as the previous month’s decline, to 565.3 thousand persons (May: 566.1k persons). The unemployment rate stayed pat at 3.3% in June, held steady for eight straight months. On another note, the number of unemployed persons posted a decline of 2.8% YoY (-16.4k persons) compared to 581.7k persons in June 2023. Accordingly, the unemployment rate decreased by 0.1 percentage points from 3.4% in the same month last year.

The youth unemployment rate (aged 15-24) remained stagnant at 10.5% in June with the number of unemployed youths falling marginally to 305.0k persons from 305.6k persons in May, while the unemployed rate for those aged between 15-30 years remained at 6.5% for the third consecutive month with 434.2k unemployed youths (May: 6.5%; 434.6k persons). In terms of the unemployment category, 79.9% were actively unemployed, meaning they were available for work and actively seeking jobs, a 0.1 percentage point higher than recorded in May (79.8%) which points to more people now who are willing to add to the economy. Nevertheless, this category saw a slight decrease of 0.1k persons at 451.9k in June from 452k in May.

Looking at the bigger picture, the labor force in June 2024 grew favorably, increasing by 0.1% MoM to 17.17mn persons (May: 17.15mn persons). Parallel to the expansion, the labor force participation rate (LFPR) jumped to 70.4% (May: 70.3%) to mark a fresh high. On a yearly basis, the number of labour force rose by 1.7% YoY or equivalent to 281.7k persons (June’23: 16.89mn persons). Hence, the LFPR was higher by 0.4 percentage points from 70.0% in June 2023.

The number of persons outside the labor force recorded a marginal decline of 0.02% MoM to 7.23mn persons (May: 7.23mn persons). On an annual basis, the number of outside labor force increased marginally by 0.1% from 7.23mn persons in June last year. The major composition of those outside the labor force was housework/ family responsibilities, accounting for 42.7%, while schooling/training ranked second with 41.4%.

Mixed Bag of Unemployment Rate Data Across Advanced Economies

The U.S. unemployment rate surprised markets yet again to record a rise to 4.1% in June 2024. According to ADP payroll data, the US private sector employment grew 157k in June (May: 157k) before slowing to a six-month low of 122k in July. Meanwhile, Canada’s unemployment rate jumped to 6.4% in June from 6.2% in the previous month. Conversely, South Korea’s unemployment rate slowed to 2.9% in the same month (May: 3.0%) while Japan’s unemployment rate finally slipped to 2.5% in June after persisting at 2.6% for the previous two months.

OUTLOOK

Malaysia's unemployment rate held steady at 3.3% in June for the eighth consecutive month, marking the lowest level since January 2020, with labor force participation reaching a historic high of 70.4%. The labor market is expected to remain stable in 2024, driven by economic growth, job creation, and rising participation. The boost in Malaysia’s tourism sector has further enhanced the economic outlook and supported labor market expansion. The government's 'Visit Malaysia 2026' initiative, aiming to attract more international tourists, has bolstered tourism-related industries, contributing to business growth and job creation. However, while the unemployment rate is likely to stay at 3.3%, signaling near full employment, geopolitical tensions and slow trade recovery could pose risks to stability.

Source: BIMB Securities Research - 12 Aug 2024