The labour market situation showed marginal improvement in May. Employment rose steadily (+0.1% MoM; Apr: +0.1% MoM), contributed by services and manufacturing sectors. The slight expansion in labour force (+0.03% MoM; Apr: +0.1% MoM) and fall in unemployed persons (-2.0% MoM; Apr: -1.4% MoM) led to lower unemployment rate of 4.5% (Apr: 4.6%).

DATA HIGHLIGHTS

Labour market conditions improved slightly in May despite the imposition of nationwide MCO during the latter half of the month amid a fresh wave of infections. The pace of decline in number of unemployed persons quickened on a MoM (-2.0%; Apr: -1.4%), and YoY basis (-11.9%; Apr: -4.6%), partly due to high base effect. The unemployment rate fell to 4.5% (Apr: 4.6%).

In terms of unemployment duration, the share of unemployed for less than 3 months (52.2%; Apr: 52.1%) and 6 to less than 12 months (13.3%; Apr: 13.0%) increased, while those without a job for 3 to less than 6 months (24.3%; Apr: 24.4%) and more than 1 year (10.2%; Apr: 10.4%) decreased.

Employment rose at a steady pace of +0.1% MoM (Apr: +0.1% MoM), but accelerated on a YoY basis (+3.2%; Apr: +2.8%), driven by low base effect. In terms of economic sector, the manufacturing and services sector continued on its upward trend. For services, industries such as wholesale & retail trade, food & beverages services, and human health & social work activities contributed the most to employment growth. Meanwhile, employment in construction, agriculture and mining & quarrying sectors declined. In terms of status of employment, the share of employees (77.9%; Apr: 77.9%) and own account workers (16.2%; Apr: 16.2%) steadied. However, the number of employed persons who were temporarily not working rose to 139.6k persons (Apr: 116.0k persons), the first increase since Jan 2021 when MCO 2.0 was implemented.

Labour force participation rate edged lower to 68.5% (Apr: 68.6%) following the slower expansion in size of labour force (+0.03% MoM; Apr: +0.1% MoM).

Separately, SOCSO reported that loss of employment (LOE) nudged higher in June to 5.6k (May: 3.7k) as the country entered the Full MCO (FMCO) from 1st June. LOE was prevalent in wholesale & retail (915) and manufacturing (742) as not all business activities in these industries were categorised as essential. Notably, despite the FMCO, total LOE did not match the June 2020 level which surged to 18.6k.

On government’s initiatives to support labour market, as of 11th June, a total of RM14.1bn has been distributed under the Wage Subsidy Programme (PSU) 1.0 and 2.0, benefitting 3.29m workers (20.4% of labour force).

HLIB’s VIEW

The recent spike in daily cases has led to the enforcement of EMCO in the Klang Valley as well as several localities in other states. Business performance may be negatively affected, leading to increased worker layoffs as this entails tighter mobility restrictions and a smaller number of sectors allowed to operate with limited capacity. While these factors pose downside risks to the economy, additional fiscal policy support and ramp-up in vaccination rates are expected to provide some respite to the economy going forward. For now, we maintain our forecast for BNM to maintain the OPR at 1.75% in 2021 and GDP forecast of 4.0%.

Source: Hong Leong Investment Bank Research - 9 Jul 2021