• Number of unemployed persons rose by 16.2k in while labour force rose at a slower pace of 5.2k in November
• In November, employment in tourism related industry continue to be affected by the pandemic alongside agriculture and mining and quarrying sectors.
• We maintain our projection for the country’s unemployment rate to average around 4.7% for 2020 before recovering to a range of 4.0-4.5% in 2021.

Total Employment Fell by 11k to 15.20mn in November

Malaysia’s unemployment rate rose for the second consecutive month by 0.1 percentage points to 4.8% in November from 4.7% in October, its highest rate since June 2020. Department of Statistics (DOS) noted that slight increase in unemployment may be due to job losses and cancellation or freezing of new hires while small businesses were also the most affected due to slower demand. During the month, the number of unemployed persons rose by 16.2k (from a rise of 10.7k in October).

The cumulative number of unemployed persons rose to 764.4k in November from 748.2k in October. Meanwhile, the labour force rose at a slower pace of 5.2k to 15.96 million persons (+24.7k in October), increasing for the seventh month in a row. The labour force participation rate (LFPR), which is the ratio of labour force to working age population, fell by 0.1 percentage points to 68.4% in November from 68.5% in October. The total employment, meanwhile, declined by 11k to 15.20mn in November from 15.21mn in October, its first monthly drop since May 2020. It was guided that employment in tourism related industry continue to be affected by the pandemic alongside agriculture and mining and quarrying sectors.

In December 2020, we believe that less stringent CMCO measures implemented until the end of 2020 will continue to provide some support for economic activity in 4Q20 as businesses will be allowed to operate as usual but under certain SOPs. Based on SOCSO statistics, loss of employment (LOE) or retrenchment data eased in December after rising for two consecutive months to 6.81k in December from 9.09k in November, its lowest level since April 2020. Besides that, the ongoing stimulus packages as well as various measures announced in Budget 2021 will support employment and help SMEs which in turn will underpin the recovery of the domestic labour market by encouraging job retention and creation going into 2021. Therefore, we maintain our projection for the country’s unemployment rate to average around 4.7% for 2020 before recovering to a range of 4.0-4.5% in 2021.

In 2021, with the reimplementation of MCO 2.0 from January 13 to 26 where only essential services are allowed to operate, there is downside risk to our projection. The current MCO covers 5 states and the federal territories of KL, Labuan and Putrajaya. These states placed under MCO accounted for 66.4% of Malaysia’s total GDP, which includes the two biggest contributors (Selangor and KL) and also accounted for 61.7% of Malaysia’s total employment. In the near term, as the number of Covid-19 cases remain high and if MCO is extended further, we believe that employment especially for SMEs may be affected. Besides that, we also expect employment in tourism sector to remain negatively impacted due to international borders remaining closed.

Source: Affin Hwang Research - 12 Jan 2021