During the full month of CMCO 2.0 in Nov, labour market conditions weakened further. Employment dipped for the first time in six months (-11.0k; Oct: +14.0k). The increase in unemployed persons picked up (+16.2k; Oct: +10.7k) but slowed in the labour force (+5.2k; Oct: +24.7k). Consequently, unemployment rate inched higher to 4.8% (Oct: 4.7%). The reintroduction of MCO 2.0 from 13th Jan till 26th Jan 2021 is expected to pose further downside risks to 2021 GDP projection of +6.0% YoY.

DATA HIGHLIGHTS

The expansion of CMCO to almost all states in Peninsular Malaysia (except Perlis, Pahang and Kelantan) in Nov has dampened the labour market recovery. The unemployment rate inched higher to 4.8% (Oct: 4.7%) as the number of unemployed persons continued to increase (+16.2k; Oct: +10.7k).

By duration, there was a decrease in share of actively unemployed persons for less than 3 months (48.8%; Oct: 48.9%), 3 to less than 6 months (26.6%; Oct: 26.9%) and 6 to less than 12 months (14.2%; Oct: 14.3%). However, those in long-term unemployment of more than 1 year increased (10.4%; Oct: 10.0%).

Employment dipped for the first time in six months (-11.0k; Oct: +14.0k) to 15.20m persons. This stemmed from employments in agriculture and mining sectors which remained in negative trend, as well as tourism-related industries in the services sector, such as ‘accommodation and food & beverages’, ‘transports & storage’ and ‘arts, entertainment & recreational activities’. Meanwhile, employment continued to grow in other services subsectors like ‘wholesale & retail trade’, ‘communication & information’, ‘human health & social work’ and ‘education’, as well as construction and manufacturing sectors. In terms of status of employment, the share of employees rose (77.5%; Oct: 77.4%) while unpaid family workers fell (3.6%; Oct: 3.7%).

Labour force participation rate fell marginally to 68.4% (Oct: 68.5%) as the growth in labour force slowed to +5.2k (Oct: +24.7k) amid increase in persons outside the labour force (+27.1k; Oct: -12.1k).

Separately, SOCSO reported lower loss of employment (LOE) in Dec (6.8k; Nov: 9.1k), with the bulk of LOE situated in Selangor (40.0%) and Kuala Lumpur (24.8%). As of 31st Dec 2020, there were 161.7k active job openings (Nov: 96.7k).

On government’s initiatives to support labour market, as of 25th Dec 2020, RM12.7bn (66.4% of allocation) of wage subsidy scheme (PSU) has been approved for 2.64m workers (16.5% of labour force). As for PSU 2.0, RM418.7m (17.4% of allocation) has been paid out, benefitting 307.4k workers (1.9% of labour force). The PENJANA SME Financing Scheme also saw a higher take up rate of RM1.12bn (56.1% of allocation) so far.

HLIB’s VIEW

Google’s Mobility Report showed that as at 5th Jan 2021, mobility in the ‘workplaces’ category declined by -23.0% compared to the baseline (CMCO 1.0: -53.9%). Nevertheless, daily new Covid-19 cases remained in large numbers, which has prompted the government to enforce stricter lockdown measures ala MCO to contain the spread. Several states are also experiencing a severe flood crisis, posing risks to overall recovery in the labour market. For now, we are maintaining our 2020 GDP forecast at -5.5% in 2020 and +6.0% in 2021 with downside risk bias.

Source: Hong Leong Investment Bank Research - 12 Jan 2021