The nationwide Full Movement Control Order (FMCO) imposed in Jun 2021 brought about renewed weakness in the labour market situation. Employment fell -0.5% MoM (May: +0.1% MoM) following a decline across all sectors. The labour force also shrunk by -0.2% MoM (May: +0.03% MoM) while unemployed persons rose (+5.6% MoM; May: -2.0% MoM), which led to a higher unemployment rate of 4.8% (May: 4.5%).

DATA HIGHLIGHTS

Labour market conditions worsened in Jun during the imposition of FMCO. The declining trend in unemployment rate has reversed to 4.8% (May: 4.5%). Number of unemployed persons increased for the first time since Jan 2021 (+5.6% MoM; May: - 2.0% MoM), but continued to record a small decline on YoY basis (-0.6% YoY; May: - 11.9% YoY).

In terms of unemployment duration, the share of unemployed has increased for periods of less than 3 months (52.3%; May: 52.2%), 3 to less than 6 months (24.5%; May: 24.3%) and 6 to less than 12 months (13.5%; May: 13.3%), while those without a job for more than 1 year decreased (9.8%; May: 10.2%).

Employment grew at a slower pace in YoY terms (+2.1% YoY; May: +3.2% YoY), but fell -0.5% MoM (May: +0.1% MoM) following lower employment across all sectors. Services sector posted its first monthly decrease after twelve months as only essential services were allowed to operate. The reduction was primarily in accommodation and food & beverages services, real estate and wholesale & retail trade activities. In terms of status of employment, there was an addition in own account workers (16.3%; May: 16.2%), partly due to permission granted for small businesses such as hawkers or food & beverage stalls to operate during FMCO. Notably, there was a sharp +661.4k increase in the number of employed persons who were temporarily not working, totalling 801.1k persons in Jun (May: 139.6k persons). However, this represented a - 11.9% YoY decrease compared to Jun 2020 (908.9k persons).

The size of labour force shrunk for the first time since the onset of the pandemic in Apr 2020 (-0.2% MoM; May: +0.03% MoM). Consequently, labour force participation rate fell to 68.3% (May: 68.5%).

Separately, SOCSO reported that as of 30th Jul, loss of employment (LOE) continued to rise to 5.95k (Jun: 5.62k). Selangor (31.3%) and KL (25.5%) recorded the highest number of LOE as these states remained in Phase 1 of the National Recovery Plan (NRP).

On government’s initiatives to support labour market, as of 23rd Jul, a total of RM14.2bn has been distributed under the Wage Subsidy Programme (PSU) 1.0 and 2.0, benefitting 3.32m workers (20.6% of labour force).

HLIB’s VIEW

While the prolonged lockdown is expected to further impede recovery in the labour market, the impact may not be broad based as some states have progressed to Phase 2 (Perak, Pahang, Kelantan, Terengganu, Penang, Sabah) and Phase 3 (Perlis, Sarawak, Labuan), which allowed for the reopening of more economic and social activities. The government has also announced relaxed restrictions for fully vaccinated individuals, applicable for states in Phase 2 onwards beginning 10th Aug. This includes inter-district travel and dine-ins. We maintain our expectation for BNM to retain the OPR at 1.75% in 2021.

Source: Hong Leong Investment Bank Research - 11 Aug 2021