Labour market conditions weakened in Oct due to the re-introduction of CMCO 2.0. Employment rose at a slower pace of +14.0k (Sep: +39.6k) in services and construction sectors. Unemployed persons increased by +10.7k (Sep: -4.1k) while labour force increased by +24.7k (Sep: +35.5k). Consequently, unemployment rate inched higher to 4.7% (Sep: 4.6%).

DATA HIGHLIGHTS

The reimplementation of CMCO during the month has impacted the labour market. The unemployment rate inched higher to 4.7% (Sep: 4.6%) as the number of unemployed persons increased (+10.7k; Sep: -4.1k) after four consecutive months of declining trend.

In terms of duration, most of the actively unemployed have been jobless for less than 3 months (48.2%; Sep: 49.2%). The share of persons unemployed for 6 to less than 12 months fell (14.3%; Sep: 14.4%), while those in long-term unemployment of more than 1 year increased (10.0%; Sep: 9.5%).

Employment continued to increase, albeit at a softer pace (+14.0k; Sep: +39.6k) to 15.21m persons. This represented a marginal growth of +0.1% (Sep: +0.3%) on a m-om basis. The services sector continued to see higher employment in ‘wholesale & retail trade’, ‘education’ and ‘communication & information activities’ subsectors, but the CMCO adversely affected tourism-related industries such as ‘accommodation and food & beverages’, ‘transports & storage’ and ‘arts, entertainment & recreational activities’. Construction sector also saw increased employment, while agriculture, manufacturing and mining sectors posted a decline. In terms of status of employment, the share of employees (77.4%; Sep: 77.2%) and employers (3.0%; Sep: 2.9%) rose, while unpaid family workers (3.7%; Sep: 3.8%) fell.

Labour force participation rate increased to 68.5% (Sep: 68.4%) as the size of labour force increased by +24.7k (Sep: +35.5k) amid decrease in persons outside the labour force (-12.1k; Sep: +8.3k).

Meanwhile, SOCSO reported a jump in loss of employment (LOE) in Nov to 9.1k (Oct: 7.4k) following the extension of CMCO to 6th Dec 2020. LOE was concentrated in Selangor (48.6%) and Kuala Lumpur (23.7%), in tourism-related and manufacturing industries. As at 4th Dec 2020, there were 36.6k active job openings (Nov: 151.1k).

On government’s initiatives to support labour market, as of 27th Nov 2020, RM12.5bn (65.5% of allocation) of wage subsidy scheme (PSU) has been approved for 2.64m workers (16.5% of labour force). PSU 2.0, which was given an allocation of RM2.4bn has also begun, with pay outs of RM293.7m (12.2% of allocation) and benefitting 307.4k workers (1.9% of labour force). The PENJANA SME Financing Scheme also saw a higher take up of RM1.1bn (54.3% of allocation) so far.

HLIB’s VIEW

As CMCO 2.0 restrictions eases up, labour market conditions are anticipated to improve. However, due to persistent social distancing measures amid high Covid-19 cases, risk aversion may persist. The loss of employment is concentrated in Selangor and Kuala Lumpur, which hold some of the highest numbers of positive cases in the country. We expect 2020 GDP to contract by -5.5% and revised downwards 2021 GDP forecast to +6.0% (previous: +6.5%).

Source: Hong Leong Investment Bank Research - 14 Dec 2020