• Number of unemployed persons declined by 5.0k in while labour force increased by 28.4k in February
• Employment in the services sector as well as in the manufacturing and construction sectors increased in February.
• 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 33.3k to 15.27mn in February

Malaysia’s unemployment rate improved and fell by 0.1 percentage point to 4.8% in February from 4.9% in January. During the month, the number of unemployed persons improved and fell by 5.0k (from a rise of 9.6k in January). The cumulative number of unemployed persons declined to 777.5k in February from 782.5k in January. According to Department of Statistics (DOS), the slight improvement during the month was attributed partly to the recovery of businesses and the labour market condition as a result of less restrictive movement and labour restrictions from the reinstatement to RMCO and CMCO since early March.

Meanwhile, the labour force rose by 28.4k to 16.05 million persons (+31.5k in January), rising for the tenth month in a row. The labour force participation rate (LFPR), which is the ratio of labour force to working age population remain unchanged at 68.5%. The total employment increased by 33.3k to 15.27mn in February from 15.24mn in January. 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 February. The increase in employed persons continued to be higher than the increase in unemployed persons for the third month in a row which suggests continued improvement in the labour demand by businesses.

Based on SOCSO statistics, loss of employment (LOE) or retrenchment data in March improved and fell to 5.79k from 6.29k in February, due likely to the reopening of the businesses as certain restriction measures were eased. Meanwhile, job placement rose to 21.3k in March from 12.2k in February.

Going forward, we believe that as more businesses will be allowed to operate and interdistrict travel allowed, further recovery in labour market conditions will be supported. Furthermore, a series of policy measures and interventions since 2020 and in early 2021 have also helped to reduce the severity of economic burden of lockdowns on households, businesses and workers. Key policies under PRIHATIN, PENJANA, Budget 2021, PERMAI, and PEMERKASA packages include the Wage Subsidy Programmes (WSP 1.0, 2.0 and 3.0), increased access to the Micro Credit Scheme and micro-SME special grants, as well as enhanced hiring incentives under the PENJANA Kerjaya initiative, supported the labour market. Meanwhile, we also believe the rollout of the vaccines will be supportive of recovery in economic activity and lift business and consumer sentiment. Nevertheless, as the improvement in labour market condition will likely be uneven across sectors, where tourism-related industries will remain vulnerable 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 Apr 2021