Labour Market Conditions Continued to Improve in Sep, Albeit at a Slower Pace. Unemployed Persons Fell by -4.1k (Aug: -3.5k) in the Agriculture and Construction Sectors While Labour Force Increased by +35.5k (Aug: +76.6k). Employment Rose by +39.6k (Aug: +80.1k) in Services and Manufacturing Sectors. Consequently, the Unemployment Rate Fell to 4.6% (Aug: 4.7%).

DATA HIGHLIGHTS

The unemployment rate fell to 4.6% in Sep (Aug: 4.7%) following a larger decline in unemployed persons (-4.1k; Aug: -3.5k) in agriculture and construction sectors. This could reflect foreign labour shortage due to on-going border restrictions.

In terms of duration, most of the actively unemployed have been jobless for less than 3 months (49.2%; Aug: 49.2%). The share of persons unemployed for 6 to less than 12 months fell (14.4%; Aug: 14.6%), while those in long-term unemployment of more than 1 year increased (9.5%; Aug: 9.4%).

To provide more insight on the current labour situation, DOSM released two new quarterly indicators, time-related and skill-related underemployment. Time-related underemployment (TRU) refers to those who were employed less than 30 hours per week and are willing to accept additional hours of work. As a share of employed persons, TRU peaked at 2.8% in 2Q20 under MCO and CMCO, and fell to 2.0% in 3Q20 under the RMCO when longer business operating hours were allowed. Skillrelated underemployment (SRU) refers to those with tertiary education and working in semi and low-skilled occupations. DOSM noted that the increasing trend in SRU since the start of the data series in 1Q17 points to some structural issues in the labour market even before the pandemic. As a share of employed persons with tertiary education, SRU rose to 36.8% in 3Q20 (2Q20: 36.5%).

Employment continued to increase, albeit at a softer pace (+39.6k; Aug: +80.1k) to 15.19m persons. Services (wholesale & retail trade and accommodation and food & beverage, education services) and manufacturing sectors saw higher employment against the previous month. In terms of status of employment, ‘employees’, ‘employers’ and ‘own account workers’ rose.

Labour force participation rate remained at 68.4% (Aug: 68.4%) due to slower growth in labour force (+35.5k; Aug: +76.6k) amid increase in persons outside the labour force (+8.3k; Aug: -48.3k).

SOCSO reported a slight moderation in loss of employment (LOE) in Oct (7.3k; Sep: 7.4k), concentrated in Selangor (37.1%), Kuala Lumpur (26.2%) and Johor (7.4%). LOE was most prominent in tourism-related and manufacturing industries.

On government’s initiatives to support labour market, as of 16th Oct 2020, RM12.0bn (62.8% of allocation) of wage subsidy scheme has been approved for 2.64m workers (16.6% of labour force). The PENJANA SME Financing Scheme also saw a take up of RM930.4m (46.5% of allocation) so far.

HLIB’s VIEW

While the reopening of economic sectors has led to improvements in the labour market, the pace of recovery has slowed, consistent with other countries’ labour market performance. In addition, the imposition of CMCO across most states from 9 th Nov – 6 th Dec 2020 is expected to put further pressure on the recovery. We maintain our GDP forecast of -5.0% YoY.

Source: Hong Leong Investment Bank Research - 10 Nov 2020