KUALA LUMPUR (July 7): Although Malaysia's labour market has shown persistent improvement, it is still unlikely to fully recover to pre-pandemic levels at this juncture given multiple headwinds on the horizon, said UOB Research.
"Worsening supply chain disruptions, elevated cost and consumer price pressures, as well as mounting fears of global recession may soon see more firms hitting the brakes on recruitment,” said UOB senior economist Julia Goh and economist Loke Siew Ting.
In a note, they cited the S&P Global manufacturing survey for Malaysia, which showed that goods producers reported job shedding for the fifth consecutive month in June as a result of the non-replacement of voluntary leavers, a lack of available workers from abroad, and reducing outstanding business in tandem with subdued demand conditions.
The survey also showed that manufacturers grew increasingly concerned that rising input costs and output prices amid sustained material shortages and elevated energy prices would weigh on the manufacturing sector, alongside the ongoing impact of the pandemic globally.
"This coupled with concerns about the timing of a full global recovery brought the degree of Malaysian business optimism down to the lowest since last August in June," said Goh and Loke.
“As such, we reiterate our year-end unemployment rate forecast of 3.6% for 2022 (Bank Negara Malaysia estimates: ~4%, end-2021: 4.2%, end-2019: 3.3%),” they said.
They added that Malaysia’s transition to endemicity with the full reopening of economic activities and country borders since April, higher national vaccination rates against Covid-19, as well as the government’s ongoing policy support for targeted and vulnerable groups remain key positive drivers of the labour market recovery in the near term.
Offering a similar view, MIDF Research projected Malaysia’s jobless rate for 2022 to be at 3.8% — lower than 4.6% in 2021 but still higher than the pre-pandemic’s 3.4%.
It said the labour market is expected to strengthen further in the second half of the year underpinned by upbeat momentum in the domestic economy and steady expansion in the external sector.
"In addition, we foresee slight improvement of non-citizen hiring. Employment of the workers had declined by -1.8% in 2020 and -2.9% in 2021 which brought to total more than 100,000 leaving the workforce due to the pandemic. Non-citizen worker constitutes about 10% of Malaysia’s working population,” said MIDF Research.
"Underpinned by domestic reopening and strong economic fundamentals, Malaysia’s unemployment rate is
projected to trend lower this year to 3.8% in 2022 from 4.6% in 2021.
"However, the projected jobless rate is still higher than pre-pandemic’s 3.4%. Employment growth forecasted at +2.5% (2021: +2%) while unemployment to shrink by -15% this year (2021: +3%)," the research house said.
The Departmemt of Statistics Malaysia (DOSM), in its latest data on Thursday (July 7), said the May unemployment rate was unchanged from April’s 3.9%. It noted that the April 2022 unemployment rate dipped below 4% for the first time since the Covid-19 outbreak began in early 2020
It added that Malaysia’s number of unemployed persons declined to 637,700 in May 2022 from 649,300 in April 2022 while the country’s labour force increased to 16.54 million persons in May 2022 from 16.5 million in April 2022.
Its chief statistician Datuk Seri Dr Mohd Uzir Mahidin said in the statement that the recovery in the Malaysian labour market in May continued to be stable and aligned with full operation of all economic activities.
Mohd Uzir said the encouraging economic activities during the month stimulated more demand for goods and services, thus, providing more opportunities for businesses to revive their revenues.
"The labour market is also observed to expand as more demand and supply of labour prevails in the market to accommodate the needs of the growing economic activities. Thus, the labour force situation during the month remained resilient registering a month-on-month increase in the number of labour force [at] 0.2% to record 16.54 million persons (April: 16.5 million persons).
"Subsequently, the labour force participation rate in May 2022 increased marginally to 69.5% (April 2022: 69.4%). This situation was steered by steady employment growth while unemployment reduced further,” he added.
Source: https://www.theedgemarkets.com/article/economists-malaysias-jobless-rate-wont-return-prepandemic-levels-now