• Malaysia’s labour market remained stable in October, consistently holding an unemployment rate of 3.4% as seen in September. This stability indicates a resilient employment landscape, balancing job availability and workforce participation in the country
  
  − Unemployed persons (-0.5% MoM; Sep: -0.6%): extending its decline for 27 consecutive months.
  
  − Consequently, the number of unemployed persons fell to 570.9k (Sep: 573.7k), the lowest since February 2020 (525.2k). Additionally, the actively unemployed fell to 457.2k (Sep: 458.9k), the lowest since March 2020 (422.9k).

• Employment growth expanded for 27th month, rising to a three-month high of 0.2% MoM (Sep: 0.1%).
  
  − The rise in employment growth is mainly driven by the services sector, especially in wholesale and retail, food and beverages, and transportation and storage sub-sector.

• Labour force participation rate remained at a record level (70.1%; Sep: 70.1%) for the fourth month mainly due to the stagnant growth of outside labour force (7.24m; Sep: 7.24m)
  
  − Labour force: growth was unchanged (0.1% MoM; Sep: 0.1%) for the fourth straight month, with the total labour force reaching a record high of 16.97m persons.

• Mixed unemployment rate across major economies
  
  − Germany: inched up in November (5.9%; Oct: 5.8%), the highest since May 2021 amid weak labour demand and slower employment growth.
  
  − Japan: reduced in October (2.5%; Sep: 2.6%), the lowest in four months as the jobless declined by 1.1% MoM, while employment growth remained positive, backed by a rebound in inbound tourism, lodging and food services.

• Unemployment rate forecast for 2023 maintained at 3.5% (2022: 3.8%) and projected to reduce to 3.3% in 2024
  
  − The labour market is expected to benefit from improved domestic and international markets in the near term, as evidenced by improvement in the latest Manufacturing PMI (47.9; Oct: 46.8) and softer contraction in exports (- 4.4%; Sep: -13.8%). This will be further supported by robust domestic demand, driven by resilient household spending towards the year-end and festive season alongside the influx of tourist arrivals.
  
  − Additionally, the ongoing freeze on foreign worker intake is set to boost local hiring and salaries. This will be reinforced by the government’s upcoming Progressive Wage Model (PWM) aimed at raising pay for low and semiskilled workforce. Government projections suggest that the PWM could reduce the unemployment rate by up to 0.35%.
  
  − That said, we expect the labour market to continue its robust performance in the near term and throughout 2024. Our unchanged forecast, barring unexpected events, predicts the average unemployment rate to settle at 3.5% in 2023 (2022: 3.8%) and further reduced to 3.3% in 2024. This outlook is underpinned by expected economic improvements, with a projected 2024 GDP growth of 4.9%, up from a forecast of 3.5% - 4.0% in 2023 (2022: 8.7%).

Source: Kenanga Research - 11 Dec 2023