• Steady growth in workforce and employment
   
• Unemployed persons continued its favorable downtrend
   
• Unemployment rate stayed at 3.3% since November last year

• Malaysia’s robust labor market is expected to persist through 2H2024

OVERVIEW

Malaysia's labor force showed steady improvement in July 2024, bolstered by ongoing economic growth that strengthened local businesses and increased demand for export products. The labor force in July 2024 continued to grow at a steady rate of 0.1%, reaching 17.20mn individuals. Additionally, the number of employed individuals increased by 0.2% MoM to a record 16.63mn persons. Meanwhile, the number of unemployed persons continued its favorable downtrend, decreasing by 0.3% MoM to 563.7 thousand persons. The unemployment rate remained unchanged at 3.3% in July (June: 3.3%), holding steady for the ninth consecutive month and marking its lowest level since January 2020. July's labor force participation rate (LFPR) remained steady at 70.4%, consistent with June 2024.

In July, Malaysia's labor market showed steady progress, highlighting the nation's solid economic foundation.

The number of employed persons expanded by 0.2%, reaching 16.63mn persons (+26.3k persons) from June’s 16.61mn persons. On a yearly basis, the number of employed individuals increased by 1.8% YoY or equivalent to +297.9k persons (July 23: 16.34mn persons). During the month, the employment-to-population ratio, a gauge of an economy's employment creation capability, grew to 68.1% (June: 68.0%). Comparatively, this ratio posted 0.4 percentage points growth from 67.7% in July 2023.

Across various economic sectors, the Services sector saw continued growth, especially in food & beverage services, wholesale & retail trade, and transportation & storage activities. Similarly, the Manufacturing, Construction, Mining & Quarrying, and Agriculture sectors also reported positive employment growth.

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 18.5% of total recruitment in July. The remaining 2.9% were unpaid family workers. Employment in the employees' category expanded slightly by 0.1% MoM to 12.48mn persons (June: 12.46mn persons). The number of employed persons of the own account workers category rose by 0.3% MoM to 3.07mn persons (June: 3.06mn persons).

Meanwhile, the number of unemployed persons slipped by 0.3% MoM to 563.7 thousand persons (June: 565.3k persons). The unemployment rate stayed pat at 3.3% in July, held steady for ninth straight months. On another note, the number of unemployed persons posted a decline of 2.7% YoY (-15.5k persons) compared to 579.2k persons in July 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 July with the number of unemployed youths falling marginally to 304.5k persons from 305.0k persons in June, while the unemployed rate for those aged between 15-30 years remained at 6.5% for the fourth consecutive month with 433.1k unemployed youths (June: 6.5%; 434.2k persons). In terms of the unemployment category, 80.0% were actively unemployed, meaning they were available for work and actively seeking jobs, a 0.1 percentage point higher than recorded in June (79.9%) which points to more people now who are willing to add to the economy. Nevertheless, this category saw a slight decrease of 1.2k persons to 450.7k in June from 451.9k in June.

Looking at the bigger picture, the labor force in July 2024 grew favorably, increasing by 0.1% MoM to 17.20mn persons (June: 17.17mn persons). Parallel to the expansion, the labor force participation rate (LFPR) remained at 70.4% (June: 70.4%). On a yearly basis, the number of labor force rose by 1.7% YoY or equivalent to 281.5k persons (July’23: 16.91mn persons). Hence, the LFPR was higher by 0.3 percentage points from 70.1% in July 2023.

The number of persons outside the labor force recorded a marginal decline of 0.01% MoM to 7.23mn persons (June: 7.23mn persons). On an annual basis, the number of outside labor force increased marginally by 0.1% from 7.23mn persons in July last year. The major composition of those outside the labor force was housework/ family responsibilities, accounting for 42.8%, while schooling/training ranked second with 41.4%.

Mixed picture of unemployment rates across advanced economies

The U.S. unemployment rate surprised markets yet again to record a rise to 4.3% in July 2024. According to ADP payroll data, the US private sector employment grew 111k in July (June: 155k). Meanwhile, Canada’s unemployment rate held steady at 6.4% in June, unchanged from the previous month. Conversely, South Korea’s unemployment rate eased to 2.5% in July (June: 2.9%) while Japan’s unemployment rate rose to 2.7% in July after easing to 2.5% in June.

OUTLOOK

Malaysia's unemployment rate remained at 3.3% in July, its lowest since January 2020, with labor force participation steady at a historic high of 70.4%. The labor market is expected to stay competitive and stable, supported by the country's strong economic growth in early 2024. Overall, Malaysia’s economic landscape continues to expand, mainly supported by rising household spending, a continuing positive labor market and greater policy support, as well as the increase in exports of goods and higher tourist arrivals, and a strong expansion in investment activities. The 'Visit Malaysia 2026' initiative is enhancing tourismrelated industries, spurring business growth and job creation. Tourism Malaysia is ramping up promotions in Vietnam, aiming for 27.3mn international tourists and RM102.7bn in revenue this year. Therefore, encouraging developments in economic and business activities will lead to the creation of more job opportunities and incomes in the economy, which will encourage more labor participation in the market. Despite the stable unemployment rate, geopolitical tensions and slow trade recovery could pose risks to stability.
 

Source: BIMB Securities Research - 10 Sept 2024