Malaysia: Labour market near full employment- UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest jobs report in Malaysia.

Key Takeaways

“Malaysia’s unemployment rate declined further to 3.5% in Feb after holding unchanged at 3.6% since Oct 2022. This brings the labor market closer to full employment as Bank Negara Malaysia (BNM) has guided that the economy is technically at full employment if the national unemployment rate reaches 3.3% (average of 3.5% for the year). That said, Malaysia’s labour market is still some way from tightness given the record labour force participation rate, higher number of workers outside the labour force than pre-pandemic, and constrained wage growth.”

“Total employment breached another fresh record of 16.19mn in Feb after improving for 19th consecutive month by 30.0k or 0.2% m/m (Jan: +28.9k or +0.2% m/m to 16.16mn). All economic sectors reported a persistent increase in hiring, led by the services sector. Accordingly, the employment-to-population ratio hit an all-time high of 67.4% (Jan: 67.3%), indicating strong ability of Malaysia’s economy to create employment.”

“The recent performance of Malaysia’s labour market remains in line with our expectations amid continued government initiatives. A persistent upturn in tourism-related industries, which are anticipated to be further boosted by the resumption of China’s tourist arrivals, will continue to be the tailwinds for the nation’s labour market recovery ahead, together with compelling foreign direct investment inflows. They will also outweigh the lingering global macro headwinds and financial uncertainty at this juncture. We keep our year-end jobless rate projection of 3.2% for this year (vs BNM est: 3.3%, end-2022: 3.6%).”