Unemployment Rate Rose to 5.3%

Labour market conditions remained weak during the Conditional MCO in May. Unemployment persons continued to increase (+47.3k; Apr: +168.3k) while employment continued to decline (-45.5k; Apr: -299.0k), particularly in services and construction sectors. Consequently, unemployment rate rose further to 5.3% (Apr: 5.0%).

DATA HIGHLIGHTS

In May, unemployment rate rose to 5.3% (Apr: 5.0%) as the number of unemployed persons continued to increase by 47.3k (Apr: 168.3k) to 826.1k persons. The number of additional unemployed persons eased in May as the economy moved into Conditional MCO (CMCO) during the month.

Employment continued to decline in May, albeit at a slower pace (-45.5k; Apr: - 299.0k) to 14.89m persons. The services sector was largely impacted, especially in tourism-related industries, event management, entertainment, sports and creation. The construction sector also saw a decline in employment owing to government’s efforts to increase detection among foreign workers within the sector. In terms of status of employment, own account workers and employers continued to see lower employment, with the bulk of job losses concentrated in own account workers (-161.5 k). Going forward, own account workers (2.423m) remain highly vulnerable to possible job losses, due to continued Recovery MCO (RMCO) measures and/or insufficient savings buffer.

Labour force participation rate continued to decline for the fourth consecutive month to 68.0% (Apr: 68.1%). This was due to the larger increase in working population (+48.7k; Apr: -25.4k), compared to rise in labour force (+1.8k; Apr: -130.7k). Outside labour force rose by +47k (Apr: +105k).

In a separate SOCSO report, loss of employment (LOE) continued to surge throughout 2Q20 (June: +18.6k; May: +10.1k; Apr: +6.1k), suggesting that employers continued to reduce headcount in the CMCO and RMCO stages. A bulk of the reported LOE was in tourism-related and manufacturing industries, and mostly came from Selangor (28.6%), Kuala Lumpur (26.6%) and Penang (14.8%). On a brighter note, job vacancies started to rise in June (51,260; May: 3,720; Apr: 695), with most openings available in manufacturing and wholesale & retail industries.

During the MCO phase, government has implemented a host of measures to minimise loss of employment through wage subsidies, employee upskilling programme, as well as hiring and training assistance (PenjanaKerjaya) among others. These programmes have been relatively successful in mitigating job losses during the MCO phase. As of 13 July 2020, RM7.79bn (56.4% of allocation) of wage subsidy scheme has been approved for 2.53m workers (16.1% of labour force). Meanwhile, RM1.64bn of total Special Prihatin Grant for Micro SMEs have been approved which will benefit 545,000 micro SMEs (78.5% of total micro SMEs).

HLIB’s VIEW

Since the lockdown that started in March 2020, total unemployed stands at 300.9k (Mar: 85.3k; Apr: 168.3k; May: 47.3k). Separately, DOSM noted that the number of persons who were not working temporarily but not currently categorised as unemployed stood at 2.27m persons (Apr: 4.87m). Nevertheless, should economic activity take longer to return to pre-Covid levels, the risk of higher unemployment could still materialise further

Source: Hong Leong Investment Bank Research - 21 Jul 2020