Despite the imposition of MCO2.0, labour market continued its recovery, albeit at a modest pace. Employment increased marginally (+0.1% MoM; Dec: +0.1% MoM), contributed by services, manufacturing and construction sectors. Meanwhile, the rise in unemployed persons (+1.3% MoM; Dec: +1.1% MoM) outpaced that of the labour force (+0.2% MoM; Dec: +0.2% MoM), resulting in a higher unemployment rate of 4.9% (Dec: 4.8%).

DATA HIGHLIGHTS

Following the intensifying health crisis, MCO2.0 was imposed from 13th January 2021 in all states except Sarawak. Despite the implementation of MCO2.0, most businesses were allowed to operate, with adherence to standard operating procedures. Nevertheless, some businesses in the services sector (restaurants, food deliveries) had limited operating hours, while interstate and inter-district travel was restricted. This has somewhat affected the labour market, which saw a higher number of unemployed persons (+9.7k, +1.3% MoM; Dec: +8.5k, +1.1% MoM), as well as unemployment rate (4.9%; Dec: 4.8%).

Nevertheless, employment rose by +21.9k persons or +0.1% MoM (Dec: +19.3k, +0.1% MoM). The increase was supported by ‘wholesale & retail trade’, ‘human health & social work’ and ‘education’ activities, but employment in tourism-related industries continued to decline with the tightening of domestic travel restrictions. Manufacturing and construction sectors also contributed positively to employment growth. Meanwhile, agriculture and mining & quarrying sectors continued to record decline in employment. In terms of status of employment, the share of employees continued to rise (77.7%; Dec: 77.6%) but fell for own account workers (15.7%; Dec: 15.8%). As a result of MCO 2.0, the number of employed persons who were temporarily not working increased in Jan to 158.9k persons (Dec: 146.2k persons).

In terms of duration, there was an increase in share of actively unemployed for less than 3 months (48.9%; Dec: 48.7%), 3 to less than 6 months (26.8%; Dec: 26.7%) and for over 1 year (10.5%; Dec: 10.4%).

Labour force participation rate rose to 68.5% (Dec: 68.4%) following an increase in size of labour force (+31.5k; Dec: +27.8k) amid decrease in persons outside the labour force (-6.0k; Dec: -2.6k). This could be due to increased optimism as positive sentiment also lifts businesses’ prospects of hiring.

Separately, SOCSO reported lower loss of employment (LOE) of 6.3k in Feb (Jan: 8.3k) as most states excluding Selangor, Johor, Penang and Kuala Lumpur were placed under CMCO.

On government’s initiatives to support labour market, as of 19th Feb 2021, a total of RM13.6bn has been distributed under the Wage Subsidy Programme (PSU) 1.0 and 2.0, benefitting 3.19m workers (19.9% of labour force).

HLIB’s VIEW

The increase in number of employed persons (+21.9k; Dec: +19.3k) outpaced the increase in unemployed persons (+9.7k; Dec: +8.5k), suggesting some improvement in labour demand as more economic activity was permitted under MCO 2.0. Going forward, as schools reopen in Mar 21, we foresee more workers may also be able to return to the labour force to look for jobs as childcare responsibilities decline at home. Ongoing domestic vaccination prospects should also lift business sentiment in the near-term and support the labour market recovery. Maintain 2021 GDP at +5.0%.

Source: Hong Leong Investment Bank Research - 9 Mar 2021