UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting have recently assessed the latest jobs report in Malaysia, and based on their observations, the unemployment rate in the country continues to decrease. The report revealed that Malaysia’s unemployment rate has declined to 3.5% in February after holding at 3.6% since October 2022. This is a sign of progress as the labor market moves closer to full employment. According to Bank Negara Malaysia (BNM), the economy is technically considered fully employed if the national unemployment rate reaches 3.3% (average of 3.5% for the year).
Despite this improvement in Malaysia’s unemployment rate, there are still challenges that need to be addressed, such as the record labor force participation rate, the higher number of workers outside the labor force compared to pre-pandemic levels, and the constrained wage growth.
The overall employment in the country reached a new high of 16.19 million in February, marking a continuous improvement over the past 19 months. In February alone, employment increased by 30,000 or 0.2% month-on-month (m/m) to 16.16 million. All economic sectors reported an ongoing increase in hiring, led by the services sector. As a result, the employment-to-population ratio reached an all-time high of 67.4% in February (up from 67.3% in January). This indicates that Malaysia’s economy has a strong capacity to create employment opportunities for its citizens.
According to Goh and Ting, Malaysia’s labor market performance is in line with their expectations, primarily due to the government’s continuous efforts and initiatives to improve the job market. A persistent upturn in tourism-related industries is expected to further boost the labor market recovery, especially with China’s resumption of tourist arrivals in the country. The increase in foreign direct investment inflows will also contribute to the recovery of the labor market.
These positive factors are expected to outweigh the lingering global macro headwinds and financial uncertainty at this point in time. Consequently, Goh and Ting maintain their year-end jobless rate projection of 3.2% for 2023, which is in line with BNM’s estimate of 3.3% (end-2022: 3.6%).
However, it’s crucial to recognize that the journey to achieving full employment in Malaysia still faces challenges. Policymakers and stakeholders must continue to devise and implement strategies to address the issues of labor force participation, workers outside the labor force, and wage growth constraints. Some potential measures include providing incentives for industries to create quality jobs, enhancing skills training and development programs, and promoting work-life balance to attract more workers back into the labor force.
The further reopening of international borders, coupled with potential increases in global trade and investment, may also contribute to Malaysia’s labor market recovery. As the country reintegrates into the global economy, more job opportunities could arise in various sectors such as manufacturing, services, and tourism.
Additionally, ensuring a robust and comprehensive social safety net is another essential aspect of supporting Malaysia’s labor market. By offering protection and assistance to vulnerable individuals and those affected by job losses, the government can help alleviate the social and economic repercussions of unemployment.
In conclusion, Malaysia’s labor market is showing positive signs of recovery as the unemployment rate steadily decreases. However, there are still challenges to overcome in the pursuit of full employment. Through concerted efforts by the government, industries, and stakeholders, Malaysia can continue to make progress in its labor market recovery and improve the overall well-being of its workforce.