Labour market conditions improved in June following the reopening of almost all economic sectors under the Recovery MCO. Unemployment persons fell by -52.9k (May: +47.3k) while employment increased (+102.3k; May: -45.5k), particularly in services sector. Consequently, unemployment rate fell to 4.9% from the peak of 5.3% in May.

DATA HIGHLIGHTS

The unemployment rate fell to 4.9% in June (May: 5.3%) as the number of unemployed persons declined by -52.9k (May: +47.3k) to 773.2k persons, owing to more economic sectors being able to operate during the Recovery MCO (RMCO) from 10th Jun – 31st Aug 2020.

Employment grew by +102.3k (May: -45.5k) to 14.99m persons. While the number of employed persons increased in most sectors, the increase was most prevalent in the services sector within e-commerce, delivery services, as well as information and communication technology related activities. In terms of status of employment, ‘employers’ and ‘unpaid family workers’ rose but ‘own account workers’ continued to experience job losses, albeit at a slower pace (-6.1k; May: -161.5k). This group comprised mostly of daily wage earners in markets and stalls who remained cautious and reluctant to resume operations as large gatherings continued to be limited under the RMCO.

In terms of duration of unemployment, 50.3% of unemployed were out of work for less than 3 months, slightly lower compared to previous month (May : 53.7%). However, the share of unemployed who were out of work for 3-6 months and 6-12 months rose in June.

Labour force participation rate posted marginal growth following four consecutive months of decline (68.1%; May: 68.0%), due to the larger increase in labour force (+49.5k; May: +1.8k), amid smaller working age population (-131.7k; May: +48.7k).

In a separate SOCSO report, loss of employment (LOE) began to moderate to 16.7k in July following the surge in 2Q20 (Jun: 18.6k; May: 10.1k; Apr: 6.1k). LOE was most apparent in tourism-related and manufacturing industries, and mostly came from Kuala Lumpur (28.5%), Selangor (27.9%) and Penang (13.9%). On a more positive note, job vacancies surged in July (72.7k; Jun: 35.6k), with most openings available in manufacturing and wholesale & retail industries.

On government’s initiatives to support labour market, as of 24th July 2020, RM8.97bn (65% of allocation) of wage subsidy scheme has been approved for 2.58m workers (16.4% of labour force). Meanwhile, as of 20th July 2020, 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

Following the reopening of most economic sectors under RMCO, DOSM noted that the number of persons who were not working temporarily but not currently categorised as unemployed dropped sharply to 768k persons (May: 2.27m). While the unemployment rate dropped from its peak in May 2020, it is expected to remain above pre-Covid levels amid a sluggish pace of recovery in economic conditions.

Source: Hong Leong Investment Bank Research - 10 Aug 2020