• Solid labor market performance in August
   
• Employment continued to trend upwards
   
• Unemployed persons recorded largest decline since September 2022

• Unemployment rate slowed to 3.2%

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

OVERVIEW

In line with the rapid rebound of trade as well as the steady labor demand across all economic sectors, Malaysia's labor force had displayed continuous robust performance in supporting economic growth. The labor force in August 2024 expanded by 0.1% MoM to record 17.22mn individuals, up from 17.20mn individuals in the month before. Looking closer, the number of employed individuals rose steadily at 0.2% MoM for the past three straight months to 16.66mn persons. Meanwhile, the number of unemployed slipped by 0.9% MoM, the largest decline since September 2022, to 558.5 thousand persons. Additionally, the labor force participation rate (LFPR) remained steady at 70.4% since June 2024. Most notably, the unemployment rate resumed its downtrend as it slowed to 3.2% (July: 3.3%), marking its lowest level since January 2020.

Malaysia's labor market has proven to be on track to bolster the continuous expansion of the economy for the past eight months.

The number of employed persons remained expansionary, rising by 0.2% from 16.63mn persons in July to 16.66mn persons (+29.4k persons) in August. Meanwhile, the number of employed individuals increased by 1.9% YoY (+306.5k persons) from 16.36mn individuals in August 2023. During the month, the employment-to-population ratio, a gauge of an economy's employment creation capability, remained steady at 68.1% as posted in July. Comparatively, this ratio recorded 0.4 percentage points growth from 67.7% in August 2023.

Across various economic sectors, the Services sector experienced upwards growth of employment, especially in food & beverage services, wholesale & retail trade, and transportation & storage activities. Such favorable performance was also seen in the Manufacturing, Construction, Mining & Quarrying, and Agriculture sectors.

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 August. The remaining 2.9% were unpaid family workers. Recruitment in the employees' category rose marginally by 0.1% MoM to 12.50mn persons as compared to 12.48mn persons in July. The number of employed persons of the own account workers category grew by 0.3% MoM to 3.08mn persons (July: 3.07mn persons).

Meanwhile, the number of unemployed persons plunged by 0.9% MoM or equivalent to -5.2k persons to 558.5 thousand persons (July: 563.7k persons). A key highlight in August is the declining trend of the unemployment rate which eased to 3.2% after trending at 3.3% for the past nine straight months. On a yearly basis, the number of unemployed persons posted a decline of 3.3% YoY (- 18.8k persons) compared to 577.3k persons in August 2023. As such, the unemployment rate decreased by 0.2 percentage points from 3.4% in the same month last year.

In line with the moderating unemployment rate, the youth unemployment rate (aged 15-24) eased to 10.4% in August after trending at 10.5% since May 2024. Reflective of the drop, the number of unemployed youths slipped to 303k (July: 304.5k). Similarly, the unemployed rate for those aged between 15-30 years slowed to 6.4% with the number of unemployed youths falling to 428.5k persons from 433.1k persons in July. In terms of the unemployment category, 80.0% were actively unemployed, meaning they were available for work and actively seeking jobs, as reported in July. Nevertheless, this category saw a decrease of 4.1k persons to 446.6k in August (July: 450.7k).

The labor force expanded steadily by 0.1% MoM to 17.22mn persons (July: 17.20mn persons) in August with the labor force participation rate (LFPR) remaining at 70.4% (July: 70.4%). On an annual basis, the number of labor force rose by 1.7% YoY (August’23: 16.93mn persons, +287.8k persons). Hence, the LFPR rose by 0.3 percentage points from 70.1% in July 2023.

The number of persons outside the labor force slipped marginally by 0.01% MoM to 7.23mn persons (July: 7.23mn persons). On a yearly basis, the number of outside labor force edged down by 0.02% from 7.23mn persons in August 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%.

Advanced economies saw positive trends in the labor market

The U.S. labor market proved to be hotter than expected when unemployment rate slowed to 4.1% in September 2024 (August: 4.2%, Est: 4.2%) while the economy saw an addition of 254k jobs, significantly higher than the predictions of 140k (August: 159k). Meanwhile, South Korea’s unemployment rate slowed significantly to 1.9% in August from 2.5% recorded in July while Japan’s unemployment rate eased to 2.5% in the same month (July: 2.7%).

OUTLOOK

Malaysia's unemployment rate further declined to 3.2% in August, the lowest level since January 2020, while the labor force participation rate held steady at a record high of 70.4%. The labor market trajectory for 2024 is optimistic, supported by the recovery of tourism, steady export growth, increased investments, and government employment initiatives. The unemployment rate is projected to remain around 3.2%-3.3%, indicating near full employment, with job creation bolstered by robust growth in manufacturing, E&E, and services. Overall, Malaysia's economic growth remains solid, driven by rising household spending, a healthy labor market, enhanced policy support, higher exports, increased tourist arrivals, and a surge in investment activities. However, geopolitical tensions and slow trade recovery could pose risks to overall stability.

Source: BIMB Securities Research - 11 Oct 2024