Cumulative Number of Unemployed Persons Rose to 826.1k in May

Malaysia’s unemployment rate rose further by 0.3 percentage points from 5.0% in April to 5.3% in May, on an uptrend for the fourth consecutive month. Despite this, the magnitude of increase in unemployment rate moderated to 0.3ppt in May compared to the 1.1ppt increase in April. This was partly due to the gradual reopening of the economy from Movement Conditional Order (MCO) to the Conditional MCO (CMCO). During the CMCO between 4 May to 9 June, more businesses and services were allowed to operate but still had to adhere to strict standard operating procedures (SOPs). In May, based on statistics, roughly about 47.3k people lost their jobs compared to job losses of 168.3k in April, where cumulative number of unemployed persons increased to 826.1k in May from 778.8k in April.

The labour force rose marginally by 1.8k to 15.71 million persons (130.7k in April) after deteriorating for two consecutive months. Meanwhile, the labour force participation rate (LFPR), which is the ratio of labour force to working age population fell by 0.1 percentage points to 68.0% in May (68.1% in April). The working population fell by 45.5k to 14.89mn in May from 14.93mn in April, where the services sector was most affected, relating to tourism, accommodation, event management and arts, entertainment, sports and recreational activities.

Moving forward, we believe the increase in unemployment rate (in term of percentage points) will likely continue to slow (not as sharp increase as in April), where during the phase in Recovery MCO (RMCO), the economy continues to reopen. During the RMCO, which started from 10 June to 31 August, almost all essential and non-essential services and businesses are operating. An improvement in labour market conditions have already been reflected in the drop in loss of employment (LOE) or retrenchment. According to SOCSO, the LOE has already eased as at 10 July to 7.9k (compared to a high of 18.6k in June), its lowest level since April 2020. This may suggest an increase in rehiring, some rise in hiring and retainment in employment as businesses resume operations.

Besides that, incentives and measures introduced under Prihatin and Penjana packages will also continue to underpin employment growth. For instance, under PENJANAKerja which is the hiring incentive and training assistance programme, 129,169 job vacancies had been advertised and 159,591 job seekers were registered through the MYFutureJobs initiative as at 13 July. The wage subsidy program has benefitted more than 2.53 million employees as at 13 July. The allocation of nearly RM15bn through Prihatin and Penjana packages will assist almost 3.3 million people. However, we believe employment in tourism-related industries will still be affected by the absence of foreign tourist arrivals as borders remains closed. Besides that, some market observers are highlighting that when the loan moratorium period as well as the wage subsidy programme scheduled to end in September 2020, this may cause unemployment rate to trend higher, possibly in 4Q20.

Source: Affin Hwang Research - 15 Jul 2020