Labour market conditions continued to improve in July under the Recovery MCO. Unemployed persons fell by -28.2k (Jun: -52.9k) while employment increased by +83.2k (Jun: +102.3k), attributed to significant increase in services sector. Consequently, unemployment rate fell to 4.7% (Jun: 4.9%).

DATA HIGHLIGHTS

The unemployment rate continued to fall to 4.7% in July (Jun: 4.9%) as the number of unemployed persons declined, albeit at a slower rate of -28.2k (Jun: -52.9k) to 745.1k persons, under the Recovery MCO (RMCO).

In terms of duration, the bulk of them have been unemployed for less than 3 months (Jul: 49.6%; Jun: 50.3%), a slight reduction from the previous month. On the other hand, those who have been unemployed for 3 to less than 6 months (27.2%; Jun: 26.8%) and more than 1 year have risen slightly (9.2%; Jun: 8.5%). The share of unemployed who are actively looking for a job increased to 83.2% (Jun: 76.8%).

Employment grew by +83.2k (Jun: +102.3k) to 15.07m persons. Most economic sectors recorded higher employment since the RMCO came into effect, with significant increase seen in the services sector, mainly in accommodation, food & beverages and transport & storage activities. In terms of status of employment, ‘employees' rose, while ‘employers’, ‘unpaid family workers’ and ‘own account workers’ declined. Notably, the decline in ‘own account workers’ steepened during the month (-36.9k; Jun: -6.1k). This group comprised mostly of daily wage earners in markets, freelancers and smallholders and continued to be the most affected due to the pandemic.

The labour force grew by +55.0k (Jun: +49.5k) to 15.82m persons, as more sectors were allowed to reopen during the RMCO period including tourism, education, arts, entertainment & recreational activities. Labour force participation rate stood at 68.1% (Jun: 68.1%).

Meanwhile, SOCSO reported sharp moderation in loss of employment (LOE) in Aug (9.3k; Jul: 16.7k; Jun: 18.6k). LOE remained concentrated in Selangor (31.8%), Kuala Lumpur (24.8%) and Penang (12.8%) in tourism-related and manufacturing industries and lower wage category. Job vacancies eased slightly, but remained high (50.2k; Jul: 54.4k) with most openings available in manufacturing and wholesale & retail industries.

On government’s initiatives to support labour market, as of 28th Aug 2020, RM10.4bn (75.2% of allocation) of wage subsidy scheme has been approved for 2.62m workers (16.6% of labour force). According to MOF, BNM’s Special Relief Facility has also been fully utilised by over 21,000 SMEs (2.3% of total SMEs) and successfully retained over 400k jobs.

HLIB’s VIEW

The resumption of economic activities during RMCO resulted in better labour market conditions as unemployed persons declined while employment rose. In addition, the number of persons who were not working temporarily but had jobs to return to also dropped sharply to 104.3k persons (Jun: 908.9k). Nevertheless, despite the reopening of most economic sectors, unemployment rate remained below the pre-COVID-19 level of 3.2%. This underlies the slow recovery in economic activity and labour market as the effects of the pandemic continue to linger, with controlled border closures and social distancing measures in place to maintain low infection rates.

Source: Hong Leong Investment Bank Research - 14 Sept 2020