Malaysia’s unemployment rate remains elevated for now
KUCHING: Malaysia’s unemployment rate could increase while youth unemployment could remain elevated in the near-term due to the measures put in place to manage the Covid-19 situation here, analysts observed.
According to a report by the research team at MIDF Amanah Investment Bank Bhd (MIDF Research), the rate of unemployment declined to 4.5 per cent in May 2021 compared with 4.6 per cent in April 2021, the lowest recorded since April 2020.
The recovering economic activities after the MCO 2.0 also led to a further rise in employment, which increased by 0.1 per cent month-on-month (m-o-m) to a new high of 15.37 million in May 2021. The latest employment already exceeded the pre-pandemic high of 15.34 million in February 2020, it pointed out.
However, it said: “The unemployment rate is expected to increase in the middle of 2021 due to the impact of the ongoing lockdown that caused a prolonged shutdown of nonessential business activities amid constrained domestic spending.”
It noted that according to data from SOCSO, there was a total of 5,621 loss of employment in June 2021, higher than 3,727 in May 2021. This indicates more job losses recorded in June due to the lockdown; in particular, the weaker domestic spending contributed to the reduced employment in the manufacturing and wholesales & retail trade sector.
“The stubbornly high Covid-19 infections remain a major concern that would further weaken labour market conditions, especially with the Enhanced MCO (EMCO) imposed in Selangor and Kuala Lumpur that caused more businesses to shut down affecting more subsectors in the manufacturing sector, include trade-oriented sectors,” it added.
Of concern, the youth unemployment rate remains high as according to the research team at Kenanga Investment Bank Bhd (Kenanga Research), the unemployment rate of agegroup 15 to 24 stood at 13.6 per cent (13.7 per cent in April).
“The situation is worrisome and reflects the impact of the Covid19 pandemic and its containment measures on the most vulnerable groups that have long struggled.
“Given the extended lockdown measures and the uncertainty over the pandemic, coupled with heightened domestic political issues, we anticipate youth unemployment to remain elevated in the near term,” it opined.
Nevertheless, it highlighted that while the extended nationwide lockdown is expected to weigh on the labour market condition in the near term, it reiterated its view that the unemployment rate would improve by year-end in line with Phase 2 and 3 of the National Recovery Plan.
“Likewise, the labour market will be supported by the vaccination progress, ongoing sizeable fiscal packages, manufacturing sector expansion, and pent-up demand on the back of economic reopening,” it said.
MIDF Research added, “In the latter part of the year, we foresee the labour market will pick up again once the restrictions are lifted allowing more businesses to resume operations.”
For now, it maintained its projection for the jobless rate to be at 4.3 per cent this year (compared with 4.5 per cent in 2020) while Kenanga Research also retained its 2021 unemployment rate forecast at 4.3 per cent, but it warned that downside risks persist.