• Number of unemployed persons rose by 8.5k in while labour force increased by 27.8k in December
   
• For the full year, the unemployment rate rose and average around 4.5% compared to 3.3% in 2019
   
• We maintain our projection for the country’s unemployment rate to average at a range of between 4.0-4.5% in 2021.

Total Employment Increased by 19.3k to 15.22mn in December

Malaysia’s unemployment rate was unchanged at 4.8% in December, which was at the same level for the second consecutive month. During the month, the number of unemployed persons rose by 8.5k (from a rise of 16.2k in November). The cumulative number of unemployed persons rose to 772.9k in December from 764.4k in November. Meanwhile, the labour force rose by 27.8k to 15.99 million persons (+5.2k in November), rising for the eighth month in a row. The labour force participation rate (LFPR), which is the ratio of labour force to working age population remained at 68.4% for the second month in a row in December. The total employment, meanwhile, increased by 19.3k to 15.22mn in December from 15.20mn in November. It was guided that employment in the services sector especially in wholesale and retail trade, human health and social work, communication and information and education activities as well as in the manufacturing sector continued to increase in December. For the full year, the unemployment rate rose and average around 4.5% compared to 3.3% in 2019, its highest rate since 1993, while the labour force participation rate fell to 68.4% from 68.7% in 2019. In the month of December, Department of Statistics (DOS) guided that the rise in Covid-19 cases as well as CMCO in KL, Selangor and Sabah had weighed on the usual year-end activities such as travelling, long holidays and vacations. In addition, flood disasters in Terengganu, Johor, Pahang, Sabah and Sarawak also affected businesses and travelling activities.

Following the reinstatement of MCO 2.0 in January, based on SOCSO statistics, loss of employment (LOE) or retrenchment data in January rose to 8.33k from 6.81k in December. Meanwhile, job placement eased to 13.4k in January 2021 from 38.7k in December. We believe the extension of MCO 2.0 until February 18th for all states in Malaysia except for Sarawak will continue to weigh on labour market conditions in the near term, especially if the number of Covid-19 cases remain elevated.

We maintain our projection for the country’s unemployment rate to average at a range of between 4.0-4.5% in 2021 (4.5% in 2020). Despite the current extended MCO, the official data guided that the daily economic losses were smaller at around RM700mn per day during current MCO 2.0, compared to RM2.4bn per day in MCO 1.0 in 2Q20. We believe the current economic situation may be more manageable and less impacted. In addition, key sectors like commodities, mining and agriculture are permitted to operate at almost full capacity. Furthermore, the enhancement of the Wage Subsidy Programme 3.0 with an additional allocation of RM1bn under the PERMAI package and the recent additional RM500mn allocation to include all companies affected by MCO in the programme as announced by the Ministry of Finance, will assist in retaining jobs.

Source: Affin Hwang Research - 9 Feb 2021