Recovery in labour market condition slowed in August, the second month under Recovery MCO (RMCO). Unemployed persons fell by -3.5k (Jul: -28.1k) while labour force increased by +76.6k (Jul: +55.0k). Employment rose by +80.1k (Jul: +83.2k). Consequently, the unemployment rate remained at 4.7% (Jul: 4.7%).

DATA HIGHLIGHTS

The unemployment rate stood at to 4.7% in Aug (Jul: 4.7%) as the decline in unemployed persons eased (-3.5k; Jul: -28.1k) to 741.6k persons, of which 82.9% are actively unemployed.

In terms of duration, majority of the actively unemployed have been jobless for less than 3 months (49.2%; Jul: 49.6%), a slight reduction from the previous month. The share of persons unemployed for 3 to less than 6 months (26.8%; Jul: 27.2%) also fell. Meanwhile, those unemployed for 6 to less than 12 months (14.6%; Jul: 14.1%) and in long-term unemployment of more than 1 year (9.4%; Jul: 9.2%) have risen.

Employment continued to increase, albeit at a softer pace (+80.1k; Jul: +83.2k) to 15.15m persons. In the services sector, higher employment was mainly recorded in wholesale & retail trade; accommodation, food & beverages as well as information & communication activities. However, the manufacturing sector recorded a decline in employment, which dragged on overall employment growth for the month. This was also consistent with the -1.9% MoM (Jul: +0.2% MoM) contraction in manufacturing IPI. In terms of status of employment, ‘employees’ and ‘own account workers’ rose, while ‘unpaid family workers’ declined.

The labour force grew by +76.6k (Jul: +55.0k) to 15.90m persons as economic activity continued to pick up during the RMCO. However, while labour force participation rate increased to 68.4% (Jul: 68.1%), it still remained below the levels pre-MCO (68.7%).

Meanwhile, SOCSO reported a continued moderation in loss of employment (LOE) in Sep (7.4k; Aug: 9.3k), concentrated in Selangor (37.1%), Kuala Lumpur (26.4%) and Johor (10.8%). LOE was most prominent in tourism-related and manufacturing industries and lower wage category. Job vacancies jumped to 54.8k during the month (Aug: 36.9k), with most openings available in manufacturing, wholesale & retail and accommodation industries.

On government’s initiatives to support labour market, as of 25 th Sep 2020, RM11.9bn (62.5% of allocation) of wage subsidy scheme has been approved for 2.63m workers (16.6% of labour force). The PENJANA SME Financing Scheme also saw a take up of RM795.3m (39.8% of allocation) so far.

HLIB’s VIEW

While labour market conditions have showed some improvement, the momentum of recovery has slowed. The number of persons who were not working temporarily but had jobs to return to only fell by -2.3k to 102.0k persons during the month (Jul: 104.3k; Jun: 908.9k). Going forward, the strength of recovery is expected to weaken further following the government’s decision to reimpose Conditional MCO in Kuala Lumpur, Putrajaya, Selangor (from 14th – 27th Oct 20) and Sabah (from 13th – 26th Oct 20) which may lead to lower footfall in premises despite allowing businesses to operate. This may cause businesses to push back on hiring plans, or lay off more workers if the Conditional MCO gets an extension. Overall, we maintain our GDP forecast of -5.0% YoY.

Source: Hong Leong Investment Bank Research - 14 Oct 2020