Malaysia’s labour market holds firm despite global trade tension

0

MIDF Resarch believes Malaysia’s job market will stay stable given that macroeconomic fundamentals remain strong and resilient. — Bernama photo

KUCHING: Malaysia’s labour force expanded by 2.6 per cent year on year (y-o-y) to 15.4 million in July 2018 – performing better than the previous month – in spite of global trade tensions between the US and China.

MIDF Amanah Investment Bank Bhd (MIDF Research) in a special report saw jobs added in the economy registered at 19,200 during the month. Meanwhile, unemployment rate maintained at full-employment condition of 3.4 per cent.

“As both domestic and external economic activities are on upbeat momentum, growths in both labour force and employment have been outpacing unemployment growth for the last 17 months since February 2017,” it said.

“We observe that the Industrial Production Index (IPI), manufacturing sales and exports in July perform better than June. For instance, IPI grew by 2.5 per cent y-o-y in July 2018 against 1.1 per cent y-o-y in June 2018, while manufacturing sales up 9.6 per cent y-o-y, higher than 7.8 per cent y-o-y in the previous month.

“On the external front, total exports rose by 9.4 per cent y-o-y amid continuous expansion in re-exports by 55.1 per cent y-o-y and rebound in domestic exports by 1.1 per centy-o-y.”

Moving forward, MIDF Research expects Malaysia’s external trade and IPI performance to expand at steady pace despite escalating trade tensions.

“On the flip side, supportive policy changes for businesses and consumers such as tax-holiday period and stabilised retail fuel prices will add support particularly for domestic-oriented industries in the second half of the year,” it said.

“Nevertheless, we opine Malaysia’s job market will stay stable given that macroeconomic fundamentals remain strong and resilient.”

The monthly average for the first half of 2018 is 91,700, which MIDF Research saw was lower than last year’s average of 123,000.

In June 2018, vacancies were highly observed in manufacturing sector at 33,400, followed by services and agriculture registered at 19,500 and 19,400 respectively.

“The growth in job vacancies is in tandem with the gradual pace in Malaysia’s external trade and industrial performances so far in 2018.

“Moving forward, we expect job vacancies to hover at 90,000 to 100,000 on monthly basis amid moderating pace in economic momentum,” it highlighted.

Meanwhile, employment growth in the manufacturing sector remained above two per cent y-o-y in July 2018.

The strong growth among others contributed by sturdy employment growth in electric and eletronic subsector of electrical capacitor resistor and basic iron and steel products.

Both sub-sectors employment grew steadily by 3.1 per cent y-o-y and 4.3 per cent y-o-y respectively.

On a flip side, the wage growth of overall manufacturing sector continues expanding at strong pace, 10.1 per cent y-o-y in July 2018.

“Supported with easing inflationary pressure, rosy labour market performance in manufacturing sector will contribute towards higher domestic consumption this year,” it added.

“Based on the latest available data, jobless rate across major and emerging economies are on declining patterns.

“For instance, unemployment rate in the US maintains at 3.9 per cent in August 2018, slightly higher than 18-year low jobless rate of 3.8 per cent y-o-y in May 2018.

“Looking ahead, we foresee labour market will remain on healthy condition globally as global and emerging economies’ manufacturing PMI stay on expansionary trend.

“Manufacturing PMI for both global and emerging economies registered at 52.5 and 50.8 points in August 2018.” MIDF Research forecast Malaysia’s unemployment rate to average at 3.3 per cent in 2018, anticipating domestic economic activities to stay on an upward trajectory given that business confidence remains upbeat.

“In addition, we noticed global indicators from developed and emerging economies are still signalling positive cues that global demand to remain on high side.

“Nevertheless, concerns still persist on the potential trade war gyrations.

“We forecast Malaysia’s job market to continue benefiting from the robust global trade activities and gradual recovery in commodity prices especially in export-reliance and commodity-oriented industries.”