● The unemployment rate climbedto 4.8% in June (May: 4.5%), reflecting the impact of Full Movement Control Order (FMCO)on the domestic labour market

− Unemployed persons (5.6% MoM; May: -2.0%): expanded sharply to a 13-month high and bringing the number of unemployed persons to 768.7k (May: 728.1k).

● Employment growth contractedfor the first time in seven months (-0.5% MoM; May: 0.1%),reflecting the impact of FMCO amid rising COVID-19 infections

− Labour force: reduced sharply (16.066m persons; May: 16.098m).

− New job creation: largest MoM contraction (-73.3k; May: 18.8k) since April 2020.

● Labour force participation rate edged down (68.3%; May: 68.5%)

− Attributable to higher growth of people outside the labour force (0.8% MoM; May: 0.3%) coupled with a drop in labour force (-0.2% MoM; May: 0.0%).

● Jobless rate eased in the advanced economies despite rising threat of the virulent Delta variant

− US: jobless rate fell sharply in July (5.4%; Jun: 5.9%),reflecting a strengthening labour market in line with sustain economic recovery.

− JP: unemployment rate edged down (2.9%; May: 3.0%) as the state of emergency was lifted in some areas.

● 2021 unemployment rate forecast revised up to 4.5% from the previous forecast of 4.3% (2020: 4.5%)

− The latest revision reflects the impact of FMCO and prolonged movement restriction on the domestic labour market. Nonetheless, the labour market is expected to gradually recover towards the year-end in line with the reopening of economic activities along with the relaxation of social activities for vaccinated individuals announced by the Prime Minister on Sunday. This will be supported by ongoing policy support, coupled with sustained export-oriented manufacturing sector activities and an unleashing of expected pent-up demand by 4Q21.

− Downside risks remain associated with the unabated surged of COVID-19 cases brought by the spread of the new and highly contagious Delta variant, which could pressure consumer and business sentiment in the near term.

Source: Kenanga Research - 11 Aug 2021