TA Sector Research

Malaysian Economy - Jobless Rate Sustains at 3.4%

Publish date: Mon, 11 Dec 2023, 09:48 AM

Data Highlights

  • The positive trajectory in employment persisted in October 2023, marking a 2.0% YoY increase and a 0.2% MoM rise, culminating in a total workforce of 16.4mn individuals. Insights from the Department of Statistics Malaysia (DOSM) revealed a consistent surge in the employed population within the Services sector, particularly evident in key areas such as wholesale and retail trade, food and beverage services, and transportation and storage activities. 
  • Furthermore, other sectors, including manufacturing, construction, mining and quarrying, as well as agriculture, also experienced a noteworthy uptick in the number of employed individuals in the month of October 2023. This robust expansion across diverse sectors underlines the resilience and dynamism of the labour market during this period. 
  • 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 149k new employees, bringing the total to approximately 12.35mn individuals. Similarly, the own-account workers category displayed a similar upward trend, with a YoY increase of 5.3% reaching a total of 2.99mn persons during the month, up from 2.83mn persons in October last year. 
  • Meantime, the number of unemployed persons continued its decline, decreasing by 5.2% YoY to 570.9k individuals (Oct 2022: 602k persons) which approaching the pre-pandemic levels of 519k in 2019. On a monthly basis, the number of unemployed persons decreased by 0.5%.
  • The labour force, encompassing both employed and unemployed individuals, saw MoM expansion of 0.1% or a YoY growth of 1.7% in October 2023, reaching a total of 16.97mn 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 minimal MoM decrease of 0.02%, totaling 7.237mn persons. Among those outside the labour force, 42.6% cited housework and family responsibilities as their primary reason for not participating in the labour market, followed closely by schooling and training at 40.9%. 
  • 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 10M23, employment rose by an average of 2.0% YoY while unemployment decreased by 8.6% YoY. 
  • 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. (TA forecast: 3.2%; Ministry of Finance forecast: 3.4%). 
  • As per the latest update from Human Resources Minister V. Sivakumar, the decision to impose a freeze on the recruitment of foreign workers, extending into the next year, remains in effect. Notably, non-citizen employment accounted for approximately 13.6% of the total workforce in Malaysia during the third quarter of this year. Recognizing the need for change in a labor market characterized by prolonged periods of low wage growth, the government is set to implement policies commencing next year to curtail dependency on foreign workers. 
  • The Economy Ministry has taken the lead in orchestrating several significant economic initiatives with a primary focus on elevating income levels, particularly for those within the lower 50% of the income bracket. One such initiative is the anticipated Wage Progressive Model, scheduled to be launched in the middle of next year. This policy aims to address wage disparities and uplift the earning potential of the workforce. 
  • Prime Minister Datuk Seri Anwar Ibrahim has underscored the elevation of living standards as a paramount objective for his coalition government. Various comprehensive plans have been unveiled with the aim of propelling the Malaysian economy up the value chain. These strategic initiatives are designed not only to generate high-paying jobs but also to contribute to an overall increase in wages, aligning with the government's commitment to fostering economic prosperity and social well-being.

Source: TA Research - 11 Dec 2023

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