Data Highlights

• Employment continued its upward trend in September 2023, increasing by 2.0% YoY or 0.1% MoM to reach a total of 16.38mn individuals. According to the Department of Statistics Malaysia (DOSM), the Services sector continued to exhibit increases in the number of employed persons, especially in Wholesale & retail trade; Food & beverage services; and Transportation & storage activities. Similarly, the Manufacturing, Construction, Mining & quarrying and Agriculture sectors also witnessed an increase in the number of employed persons during the month.

• The largest composition of employed persons remained in the ‘Employees’ category, comprising 75.3% of all employed individuals. This category saw an annual increase of 1.2%, equating to 152k new employees, bringing the total to approximately 12.33mn individuals. Similarly, the own-account workers category displayed a similar upward trend, with a YoY increase of 5.3% reaching a total of 2.97mn persons during the month, up from 2.82mn persons in September last year.

• Meantime, the number of unemployed persons continued its decline, decreasing by 5.2% YoY to 573.7k individuals (Sept22: 605k persons). With this positive trend, it is approaching the pre-pandemic levels of 519k in 2019. On a monthly basis, the number of unemployed persons decreased by 0.6%.

• The labour force, encompassing both employed and unemployed individuals, saw MoM expansion of 0.1% or a YoY growth of 1.8% in September 2023, reaching a total of 16.95mn individuals. This growth suggests a healthy level of engagement in the labour market, with a labour force participation rate of 70.1%. Meanwhile, the number of individuals outside the labour force remained relatively stable on an annual basis, but there was a slight MoM increase of 0.1%, totaling 7.24mn persons. Among those outside the labour force, 42.9% cited housework and family responsibilities as their primary reason for not participating in the labour market, followed closely by schooling and training at 40.3%.

• To date, Malaysia has witnessed a marked improvement in its unemployment rate. During the month, the rate stood at 3.4% and this positive trend is indicative of the country's gradual economic recovery, which has also been facilitated by the government's initiatives. Notably, in the third quarter of this year, the jobless rate decreased to 3.4%, down from 3.5% in the previous two quarters and a peak of 4.8% in the second quarter of 2021.

• We believe that Malaysian labour market is poised to maintain its stability in the forthcoming months, bolstered by the resilient domestic economy. This positive trajectory is expected to continue to generate an increased demand for labour, serving as a vital driver for the ongoing stabilisation of the economy. If this positive trend continues, we can expect the unemployment rate to sustain at the current rate until year end. On average, the jobless rate for the whole year is projected to be at 3.4%, marking an improvement from the 3.8% recorded in 2022 and the 4.6% rate observed in 2021.

• In the upcoming year, we anticipate further improvement in the unemployment rate, driven by a range of initiatives and allocations aimed at expanding career opportunities for various communities and targeted groups. These initiatives include: 
  o The continuation of the SOCSO Career Building Programme, ensuring that informal workers, particularly those engaged in the gig economy, have access to career development programs and micro-credential skills training.
  o Programs like the Bumiputera Youth Entrepreneurs Programme (TUBE) and the TEKUN Belia Mobilepreneur Scheme, designed to support young entrepreneurs, will be continued.
  o A substantial allocation of RM6.8bn to Technical and Vocational Education and Training (TVET) training and RM1.6bn to the Human Resource Development Corporation (HRD Corp) will result in the creation of 1.7mn training offerings. These measures are expected to foster a business-friendly ecosystem and provide a larger pool of highly skilled workers.

• As a result of these efforts, the government aims to achieve an unemployment rate of 3.4% in 2024 (TA: 3.2%). These initiatives underscore a commitment to enhancing employment prospects and nurturing a more resilient and skilled workforce in the coming year.

• On the matter of the Malaysian boycott of businesses with direct connections to Israel, such as McDonald's and Starbucks, it is important to recognize the potential wideranging negative implications on the Malaysian economy and labour market. While such a boycott may serve as a powerful expression of political or humanitarian concerns, it is imperative to carefully consider the potential consequences on local businesses, employment, and economic stability. Policymakers, businesses, and citizens should thoroughly weigh the economic and social ramifications of these decisions while actively seeking peaceful and constructive means to address political issues.

• If a substantial number of Malaysians were to participate in a boycott of businesses with Israeli ties, it could indeed lead to a decline in sales and revenues for these companies. Particularly, McDonald's, Starbucks, and Grab are prominent multinational corporations with numerous outlets and employees in Malaysia. A decrease in sales could significantly impact their financial performance, potentially reducing their tax contributions to the government. Moreover, these global corporations also rely on local suppliers who provide various goods and services, including agricultural products, packaging, and maintenance. A boycott could affect these local businesses, which rely on the income generated from their contracts with these multinational companies.

• In terms of employment, these companies offer jobs to a substantial number of Malaysians. A boycott could result in layoffs and job losses, which could contribute to an increase in unemployment rates, particularly among low-skilled workers. Therefore, it is essential to approach these decisions with careful consideration and explore alternative avenues for addressing political concerns that do not have such significant negative impacts on the local economy and workforce.

Source: TA Research - 9 Nov 2023