About 85.3k People Lost Their Jobs in March

Malaysia’s unemployment rate rose sharply to 3.9% in March, an increase by 0.6 percentage points from 3.3% in February, its highest since June 2010, which reflected rising number of unemployed persons to total labour force. About 85.3k people lost their jobs in March, where cumulative number of unemployed persons increased to 610.5k in March from 525.2k in February. The labour force declined by 0.2% mom to 15.84 million persons in March compared to 15.87 million persons in February.

The country’s labour force participation rate (LFPR), which is the ratio of labour force to working age population fell by 0.1 percentage points to 68.6% in March (68.7% in February), its lowest rate since August 2019. A total of 31.4% of the working age population (15-64 years old) were outside the labour force accounting for 7.24 million people in March (7.22 million in February). The seasonally adjusted unemployment rate rose sharply to 3.9% in March from 3.3% in February. This reflected that the sharp increase in unemployment rate (i.e. 85.3k job losses during the month) was not related to festive period or seasonal factors. However, this was due to the impact from Covid-19 as a result of Movement Control Order (MCO), which began from 18th March 2020.

With labour market conditions remaining weak, we believe the country’s unemployment rate will likely trend higher in 2Q20, especially in April and May. During the enforcement of MCO, with non-essential busineses and some private premises closed and ceasing operations, some business owners reduced costs by cutting some workers. We believe unemployment rate may increase by another 0.6 percentage points to 4.5% estimated for April. However, the rise in unemployment rate will be under control and cushioned by the measures taken by the Government. For example, we believe the recent Conditional MCO, where most economic sectors been allowed to resume their operations albeit with strict standard operating procedures (SOPs) will support and hold on employment. We also believe stimulus measures introduced by the Government such as the Wage Subsidy Programme and the Employment Retention Programme (ERP) will partly help employers to retain their employees.

However, despite the assistance from the Government, we believe there are downside risks from employment in sectors that are tourism-related, which will continue to be negatively impacted. For example, foreign tourists are still somewhat barred from entering Malaysia, as well as public gatherings in events/conferences will be prohibited. As a result, we believe the drag on the labour market and unemployment will likely be in the tourism-related industry, which accounted for 23.5% of total employment in 2018. We expect the country’s unemployment rate will continue to trend higher, possibly reaching between 5 to 6% projected for 2020 (3.3% in 2019).

Source: Affin Hwang Research - 12 May 2020