• Number of unemployed persons rose by 10.7k in while labour force rose at a slower pace of 24.7k in October
• The recent easing of CMCO restrictions from December 7th will also provide support for economic activity in 4Q20 as more businesses will be allowed to operate as usual but under certain SOPs.
• We expect the country’s unemployment rate to average around 4.5-4.7% for 2020 (3.3% in 2019)

Employment rose at a slower pace of 14k to 15.21mn

Malaysia’s unemployment rate rose by 0.1 percentage points to 4.7% in October (4.6% in September), reversing the improvement trend seen since the high of 5.3% in May. Department of Statistics (DOS) attributed the increase in unemployment rate to conditional movement control order (CMCO) in several states from 14 October 2020, where industrial and business activities continued their operations with compliance to certain standard operating procedures (SOPs).

During the month, the number of unemployed persons rose by 10.7k (from a decline of 4.1k in September). The cumulative number of unemployed persons rose to 748.2k in October from 737.5k in September. Meanwhile, the labour force rose at a slower pace of 24.7k to 15.96 million persons (+35.5k in September), increasing for the sixth month in a row. The labour force participation rate (LFPR), which is the ratio of labour force to working age population, increased to 68.5% in October from 68.4% in September, its highest level since March 2020. The working population also increased for the fifth consecutive month by 14k to 15.21mn in October from 15.19mn in September. Based on SOCSO statistics, loss of employment (LOE) or retrenchment data rose for the second consecutive month to 9.09k in November from 7.42k in October, but remains below its high of 18.6k in June.

Going forward, we believe that even with the re-introduction of targeted CMCO measures since mid-October in several states, the negative impact on labour market will not be as severe as during MCO and the previous CMCO as current CMCO measures are less stringent. Furthermore, beginning 7 December 2020, the government allowed inter-state and inter-district movement in the whole country except in Enhanced Movement Control Order (EMCO) areas. The current less stringent restrictions will also provide some support for economic activity in 4Q20 as more businesses will be allowed to operate as usual but under certain SOPs. Besides that, the ongoing stimulus packages as well as measures announced in Budget 2021 will provide some support to domestic demand, which will encourage businesses on job retention and creation going into 2021. Furthermore, if there is an availability of a vaccine in 2021, this will also further help labour market conditions.

Nevertheless, there are still some downside risks on economic activity, which may impact labour market, especially if the number of Covid-19 cases continue to remain elevated and containment measures are tightened further. As international borders are likely to remained closed for in the near to medium term in order to contain the infection, the employment in the tourism sector will still be negatively impacted. Employment in the tourism sector accounts for 23.6% of total employment. As a result, we maintain our projection for the country’s unemployment rate to average around 4.5-4.7% for 2020 (3.3% in 2019).

Source: Affin Hwang Research - 14 Dec 2020