What the Unemployment Rate Will Look Like in the Next Few Months

According to Malaysian Rating Corp Bhd, Malaysia's unemployment rate would most likely decrease in the next few months after the reopening of economic activities. 

Its head of economic research, Firdaos Rosli, said that the country's unemployment rate dropped by 4.6% in August 2021 compared to 4.8% in July as the government allowed more economic activities to restart in the recovery phase. 

However, he remarked there would also be a time when the rate would not decrease, which is a natural phenomenon as a percentage of the population will stay unemployed for several reasons.

He said that it is uncertain whether there would be a new level for the natural rate of unemployment, specifically after the crisis. Without the crisis, Malaysia's unemployment rate would be from 3.3% to 3.5% of the labour force. 

 

What caused the drop in unemployment in August?

Firdaos said the decrease in unemployment in August was primarily due to the rehiring of workers above 30 years old. 

As for workers below the age group and fresh graduates, he said companies that hire those with minimum experience would have the upper hand in determining their salaries.

According to him, economic crisis strikes younger workers disproportionately, and hence it would be more difficult for young jobseekers during a crisis. 

He said the demand side of the labour market has the advantage during this time, and it all depends on the younger jobseekers' preferences and priorities. 

 

DOSM data on unemployment

Last Friday, the Department of Statistics reported that the number of unemployed persons decreased 4.6% every month to 748,800 in August as employment increased with more states moving into the subsequent phases of the National Recovery Plan. In July, there were 778,200 unemployed individuals. 

The number of employed persons increased by 0.5% month-on-month (MoM) to 15.38 million in August, with the employment-to-population ratio rose by 0.2% to 65.2%. In July, the number of employed individuals was 15.29 million.

Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said that August recorded the first decline in unemployment after seeing increases in June and July. The unemployment rate for August dropped 0.2% to 4.6% compared to July, which reported 4.8%. 

In July, there were 778,200 unemployed individuals, versus 748,800 in August.

Therefore, the labour force rate continued to rise for the second month by 0.3% to 16.13 million individuals in August. In July, the labour force number was 16.07 million persons. The labour force participation rate in August increased by 0.1% to 68.4%.

With the vaccination rate surpassing 90% for the adult population and the reopening of economic activities at a greater capacity, Mohd Uzir said these movements indicated that Malaysia's economy would rejuvenate steadily. However, challenges persist in the upcoming months due to the doubtful health situation.

 

Employment growth by sector

The services sector continued to record positive growth in employment every month, especially in these activities:

• Food & beverages,

• Wholesale & retail trade, and

• Human health and social work activities. 

The manufacturing and constructions sectors also registered positive employment growth after a decrease last month. However, the agriculture and mining, and quarrying sectors continued to be on a downward trend. 

The reopening of more economic activities led the number of employed individuals who were temporarily not working to further drop by 13.5% to 671,200 persons. In July, the number was 776,300.

The actively unemployed or those available for work and actively seeking jobs comprised 83.8% of the total unemployed. This group was decreased by 3.7% to 627,500 individuals.

A related trend was seen in the inactively unemployed who believed there were no jobs available, which dropped by 4.4% MoM to record 121,300 people. 

 

Will there be intense competition in hiring?

MIDF Research economist Abdul Mui'zz Morhalim said unlike businesses in major markets that face trouble to fill open positions with qualified candidates, he does not expect intense competition or challenge for Malaysian employers to increase hiring. 

Labour demand is also foreseen to rise as more states transition to the next phases of the NRP. 

He expected the labour supply to grow with more people entering and returning to the job market. Monitoring the pace of job market recovery in 2021, he said that MIDF Research does not expect the recovery to be fast and absorb the extra labour force quickly. 

According to him, MIDF Research expects the jobless rate to stay high, and it would take some time before it will return to pre-pandemic levels. 

The employment outlook will also improve for the domestic-oriented industries, particularly the services sector.

Abdul Mui'zz said the improving consumer spending would drive hiring in wholesale and retail trade and food and beverage services.

 

Source: The Malaysian Reserve

 

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