The labour market situation remained weak in Jul. Nevertheless, the transition of eight states to Phase 2 of the National Recovery Plan (NRP) during the month has helped cushion the impact on the labour market. Employment fell -0.02% MoM (Jun: -0.5% MoM) following a decline across all sectors, excluding services. The labour force marginally expanded (+0.04% MoM; Jun: -0.2% MoM) while growth of unemployed persons slowed (+1.2% MoM; Jun: +5.6% MoM). Consequently, the unemployment rate maintained at 4.8% (Jun: 4.8%).

DATA HIGHLIGHTS

The transition of eight states (Perlis, Kelantan, Terengganu, Pahang, Perak, Pulau Pinang, Sabah and Sarawak) to Phase 2 of the NRP has helped cushion the impact of lockdown measures on the labour market in Jul. These states constitute 47.3% of Malaysia’s total labour force, while the remaining states still in Phase 1 make up 52.7%. The number of unemployed persons slowed to +1.2% MoM (Jun: +5.6% MoM). The unemployment rate stood at 4.8% (Jun: 4.8%).

In terms of unemployment duration, the share of unemployed for less than 3 months nudged up (53.9%; Jun: 52.3%). However, those without a job for longer periods of 3 to less than 6 months (24.1%; Jun: 24.5%), 6 to less than 12 months (13.2%; Jun: 13.5%) and more than 1 year (8.8%; Jun: 9.8%) has decreased.

Employment growth remained positive (+1.5% YoY; Jun: +2.1% YoY) but recorded a slight decrease on a MoM basis (-0.02% MoM; Jun: -0.5% MoM) following a decline across all sectors, excluding services. Higher employment in this sector was mainly attributed to food & beverages services, transport & storage and information & communication services. In terms of status of employment, there was a slight addition in own account workers (16.4%; Jun: 16.3%), partly due to the green light given to small businesses such as hawkers or food & beverage stalls to operate during the NRP. Meanwhile, the number of employed persons who were temporarily not working fell to 776.3k persons (Jun: 801.1k persons).

The size of labour force expanded on a MoM (+0.04% MoM; Jun: -0.2% MoM) and YoY basis (+1.6% YoY; Jun: +1.9% YoY). Labour force participation rate maintained at 68.3% (Jun: 68.3%).

Separately, SOCSO reported that loss of employment (LOE) declined in Aug to 4.3k (Jul: 6.0k), indicating an improvement in the labour market. LOE was mostly concentrated in Phase 1 states, namely Selangor (37.2%), KL (27.1%) and Johor (8.3%).

On government’s initiatives to support labour market, as of 20th Aug, a total of RM14.3bn has been distributed under the Wage Subsidy Programme (PSU) 1.0 and 2.0, benefitting 3.33m workers (20.7% of labour force).

HLIB’s VIEW

The decline in Aug’s LOE number was consistent with the transition of more states into later phases of the NRP. As of end-Aug, only four states and two federal territories (Selangor, Johor, Kedah, Melaka, KL and Putrajaya) remained in Phase 1. Klang Valley is set to progress to Phase 2 on 10th Sep. This should further improve the labour market situation, alongside permission granted for businesses to operate based on their workers’ vaccination rate. We maintain our expectation for BNM to retain the OPR at 1.75% in 2021 and GDP at +3.1% YoY.

Source: Hong Leong Investment Bank Research - 10 Sept 2021