KUCHING: Strong export performances last year contributed significantly towards strengthening Malaysia’s labour market, analysts believe.
With domestic and global economic activities on an upward trend, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) believe that this positive exports momentum would continue and hence, benefit the local labour market.
It anticipated domestic as well as global economic activities to stay on upward trajectory given key economic indicators are showing sign of optimism.
“Therefore, we forecast global trade will improve further this year and Malaysia as an export-reliance economy will benefit from the development via increase in exports demand and more jobs creation especially in the exports-oriented industries,” it added.
As per the Department of Statistics Malaysia’s (DOSM) latest monthly release on labour force statistics, the labour force grew by 1.7 per cent year on year (y-o-y) to 15.084 million in November, while employment increased by 1.8 per cent and unemployment was down by 1.1 per cent.
According to DOSM, y-o-y unemployment rate dropped 0.1 percentage point to 3.3 per cent in November 2017, compared to November 2016.
MIDF Research observed that growths in both labour force and employment have been outperforming unemployment growth for nine consecutive months since March 2017 on upbeat momentum of both domestic and external economic activities.
“We opine strong export performances in the last year have contributed significantly towards strengthening Malaysia’s labour market. Export growth in November for instance, rose by 14.4 per cent y-o-y, above market expectation. This is the eleventh consecutive months of double digit growth in export for 2017,” MIDF Research said.
It added that domestically, industrial production growth reached three-month high at five per cent y-o-y while distributive trade maintained at nine per cent y-o-y growth in the same month.
MIDF Research noted that based on labour market data, the last time retrenched workers registered at 83,800 was back in 1998.
The research arm further noted that even during the Global Financial Crisis (GFC) 2009, the number of retrenchment recorded at 25,100 despite of greater slowdown in global economic growth.
“In 2018, business cost is expected to rise partly due to the Employee Insurance Scheme (EIS), levy imposition on employers for hiring foreign workers and possible revision of minimum wage,” the research arm said.
In spite of this, MIDF Research viewed the implementation of these policies will not harm business activity as well as employment in Malaysia especially with the current upbeat economic momentum.
“Gradual rise in global commodity prices, optimistic business confidence globally and further uptrend in global trade activities will provide positive spill-over effects to Malaysia’s economic performance this year.
“Moreover, the key ideas implementing EIS is to protect those being retrenched in the short term from high living cost while the levy imposition is one of the efforts by the government to reduce the dependency on low-skill foreign workers.”
In line with the Malaysia Eleventh Plan, the level of skilled workers is expected to improve from 28 per cent in 2015 to 35 per cent in 2020, the research team said.
On job vacancies, MIDF Research expected job vacancies in November to stay high given that external trade and industrial activities remain on upbeat momentum.
Meanwhile, MIDF Research viewed the upward trend in the wage growth could positively contribute to domestic consumption in the near term.
Towards the end of 2017, the research arm predicted that petroleum-related and export-oriented sectors would stay on upward trajectories due to steady upbeat momentum in global trade activities and gradual recovery in crude oil prices.
Looking ahead, MIDF Research foresees labour market will remain on healthy condition globally amid of global and emerging economies’ manufacturing purchasing managers index (PMI) stay on expansionary path.
“Manufacturing PMI for global registered at 50.7 points in December,” it said.
MIDF Research also expected that Malaysia’s unemployment rate to average at 3.3 per cent in 2018.