The labour market continued its positive recovery momentum in Jul. Employment growth gained momentum (+0.3% MoM; Jun: +0.2% MoM), driven by higher employment in the services, manufacturing and construction sectors. The labour force grew at a steady pace of +0.2% MoM (Jun: +0.2% MoM), while the number of unemployed persons fell -1.6% MoM (Jun: -1.1% MoM). Consequently, the unemployment rate edged lower to 3.7% (Jun: 3.8%)

DATA HIGHLIGHTS

The labour market continued its positive recovery momentum in Jul, in line with the country’s reviving economy as it entered its fourth month of the transition to endemicity. The number of unemployed persons declined further on a MoM (-1.6%; Jun: -1.1%) and YoY basis (-20.2% YoY; Jun: -18.0%). Consequently, the unemployment rate edged lower to 3.7% (Jun: 3.8%).

In terms of unemployment duration, the share of unemployed for less than 3 months (59.5%; Jun: 59.0%) increased, while the share without a job for longer durations of 3 to less than 6 months decreased (22.4%; Jun: 22.8%). Meanwhile, the shares of unemployed for 6 to less than 12 months (11.6%; Jun: 11.6%) and more than 1 year (6.6%; Jun: 6.6%) were unchanged.

Employment growth gained momentum on both a MoM (+0.3%; Jun: +0.2%) and YoY basis (+4.5%; Jun: +4.2%). Growth continued to be driven by higher employment in the services, manufacturing, and construction sectors, which offset the declining employment in the agriculture and mining sectors. In the services sector, the upward trend mainly stemmed from food & beverages services, wholesale & retail trade, as well as administrative & support service activities. In terms of employment status, employees growth picked up (+0.2% MoM; Jun: +0.1% MoM), while own account workers rose at a steady pace (+0.8% MoM; Jun: +0.8% MoM). Meanwhile, the number of employed persons who were temporarily not working decreased to 83.7k persons (Jun: 87.8k persons).

The labour force recorded steady expansion on a MoM basis (+0.2%; Jun: +0.2%) and accelerated on a YoY basis (+3.3%; Jun: +3.1%), following the higher demand for labour as economic and social activities grew. In line with this, the labour force participation rate inched higher to 69.6% (Jun: 69.5%).

Separately, SOCSO reported a slight decline in loss of employment (LOE) in Aug (2.1k; Jul: 2.6k) concentrated mostly in manufacturing, wholesale & retail, and professional & technical industries. KL (31.3%) and Selangor (28.8%) remained the two states with highest LOE concentration.

As of 12 Aug, the government approved wage subsidy applications totalling RM20.95bn under its five wage subsidy programmes (PSU), thus maintaining the employment of 2.96m employees, amounting to 17.8% of total labour force.

HLIB’s VIEW

The labour market situation is expected to continue on its recovery trajectory in the upcoming months, especially in the services sector, benefitting from the better growth prospects following the economic reopening and revival of the tourism industries. However, mounting cost pressures, worsening supply chain disruptions, as well as increasing recessionary risks could slow down the recruitment drive. We maintain our 2022 GDP forecast at +6.5% YoY.

Source: Hong Leong Investment Bank Research - 12 Sept 2022