• Number of unemployed persons rose by 9.6k in while labour force increased by 31.5k in January
• Employment in the services sector as well as in the manufacturing and construction sectors increased in January.
• We maintain our projection for the country’s unemployment rate to average at a range of between 4.0-4.5% in 2021 (4.8% in December 2020).

Total Employment Increased by 21.9k to 15.24mn in January

Malaysia’s unemployment rate rose by 0.1 percentage point to 4.9% in January from 4.8% in December, its highest rate since June 2020. However, unemployment rate was lower than the high of 5.3% in May 2020. During the month, the number of unemployed persons rose by 9.6k (from a rise of 8.5k in December). The cumulative number of unemployed persons rose to 782.5k in January from 772.9k in December. Department of Statistics (DOS) attributed the increase to reinstatement of MCO 2.0 from 13 January 2021 in most states namely Johor, Melaka, Penang, Selangor, Sabah and the Federal Territories, which led to an uneven recovery of businesses and the labour market condition.

Meanwhile, the labour force rose by 31.5k to 16.02 million persons (+27.8k in December), rising for the ninth month in a row. The labour force participation rate (LFPR), which is the ratio of labour force to working age population rose by 0.1 percentage point to 68.5% from 68.4% in December. The total employment, meanwhile, increased by 21.9k to 15.24mn in January from 15.22mn in December. It was guided that employment in the services sector especially in wholesale and retail trade, human health and social work, and education activities as well as in the manufacturing and construction sectors increased in January. Despite the rise in unemployment rate, the increase in employed persons continued to be higher than the increase in unemployed persons for the second month in a row which suggests continued slight improvement in the labour demand by businesses.

Based on SOCSO statistics, loss of employment (LOE) or retrenchment data in February fell to 6.1k from 8.33k in January, likely due to the gradual reopening of the businesses as certain restriction measures were eased. Meanwhile, job placement eased to 12.2k in February from 13.4k in January. According to recent government estimates, in the second phase of MCO 2.0, the daily economic losses amounted to RM300mn per day compared to earlier estimates of RM600mn per day amid the reopening of more economic sectors. This was much lower than the RM2.4bn losses per day in MCO 1.0 in 2Q20.

We believe that as more businesses will be allowed to operate and interdistrict travel is allowed from March 2021, some recovery in labour market conditions will be supported. Furthermore, the enhancement of the Wage Subsidy Programme 3.0 under the PERMAI package will assist in retaining jobs while the rollout of the vaccines is expected to support recovery in economic activity and lift business and consumer sentiment. 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).

Source: Affin Hwang Research - 9 Mar 2021