● The unemployment rate edged down in September (4.6%; Aug: 4.7%), but still above the pre-pandemic level (Feb: 3.3%) but a steady drop from the peak of 5.3% in May at the height of the COVID-19 pandemic

− Unemployed persons (-0.6% MoM; Aug: -0.5%): four consecutive months of reduction with the total number of unemployed persons lowered to 737.5k (Aug: 741.6k). Nevertheless, the pace of decline seems to be slowing, signifying that the labour market recovery may be losing momentum.

● Employment continued to grow at a softer pace (0.3% MoM; Aug: 0.5% MoM), with a similar slowdown registered in labour force growth (0.2%; Aug: 0.5%)

− Labour force: hit a record high level (15.93m persons; Aug: 15.89m).

− New job creation: sizeable drop leading to a four-month low (39.6k; Aug: 80.1k).

● Labour force participation remained steady at 68.4% (Aug: 68.4%)

− Growth of people outside of the labour force rebounded marginally (0.1% MoM; Aug: -0.7%), indicating an increase in discouraged workers due to the stalled economic recovery.

− Job vacancies declined sharply (-32.1% MoM; Sep: 17.8% MoM)to its lowest level in three months, reaching 25.5k in August. Meanwhile, the share of low-skilled jobs narrowing to 43.5% (Jul: 45.7%).

● Mixed jobless rate performance globally

− US: eased for the sixth consecutive month (6.9%; Sep: 7.9%), as hard-hit sectors continued hiring despite Congress disagreeing on a new stimulus package

− KR: unexpectedly rose to 3.9% (Aug: 3.2%), as around 392.0k jobs were lost in September, due to the worsening COVID-19 pandemic

● 2020 unemployment rate forecast maintained at 4.2% (2019: 3.3%) in line with the Ministry of Finance forecast

− Despite continued recovery expectation in the labour market, we remain cautious on lingering downside risk due to the worsening domestic COVID-19 situation with lockdown measures in major town and cities extended. Nevertheless, the recovery should be further supported by government measures that encourage hiring and retaining staff, which will likely take into effect towards end-2020. With the expectation of a growth rebound next year, we forecast the unemployment rate to be reduced to around 3.7% (MoF 2021: 3.5%)

Source: Kenanga Research - 10 Nov 2020