The magnitude of increase in unemployment rate moderated in May, partly due to the gradual reopening of the economy from MCO to the Conditional MCO. — Bernama photo
KUCHING: The continuous rise in Malaysia’s unemployment rate in May led analysts to reaffirm their views that the labour market will remain under pressure for the rest of the year.
This comes after the unemployment rate rose further by 0.3 percentage points (ppt) from five per cent in April to 5.3 per cent in May, on an uptrend for the fourth consecutive month.
Despite this, the magnitude of increase in unemployment rate moderated to 0.3ppt in May compared to the 1.1ppt increase in April. This was partly due to the gradual reopening of the economy from Movement Conditional Order (MCO) to the Conditional MCO (CMCO).
During the CMCO between May 4 to June 9, more businesses and services were allowed to operate but still had to adhere to strict standard operating procedures (SOPs).
“In May, based on statistics, roughly about 47,300 people lost their jobs compared to job losses of 168,300 in April, where cumulative number of unemployed persons increased to 826,100 in May from 778,800 in April,” commented analysts at Affin Hwang Investment Bank Bhd (AffinHwang Capital).
“Moving forward, we believe the increase in unemployment rate (in term of percentage points) will likely continue to slow (not as sharp increase as in April), where during the phase in Recovery MCO (RMCO), the economy continues to reopen.”
AffinHwang Capital said an improvement in labour market conditions have already been reflected in the drop in loss of employment (LOE) or retrenchment. According to SOCSO, the LOE has already eased as at 10 July to 7,900 — its lowest level since April 2020.
“This may suggest an increase in rehiring, some rise in hiring and retainment in employment as businesses resume operations.
“Besides that, incentives and measures introduced under Prihatin and Penjana packages will also continue to underpin employment growth.
“For instance, under PENJANAKerja which is the hiring incentive and training assistance programme, 129,169 job vacancies had been advertised and 159,591 job seekers were registered through the MYFutureJobs initiative as at 13 July. The wage subsidy program has benefitted more than 2.53 million employees as at 13 July.
“The allocation of nearly RM15 billion through Prihatin and Penjana packages will assist almost 3.3 million people.”
Looking ahead, economists with AmBank Research expect the labour market to remain under pressure as uncertainty remains high, with growing concern of the “Second Wave” of the virus attack.
“Should that happen, there is the risk of another round of lockdowns and MCOs and it remains unclear if it will be similar to the first attack or will be more targete,” it opined in its own notes yesterday.
“Besides, political uncertainties, post moratorium and end of wage subsidy are likely to impact the job market. However, the upside to the unemployment rate is likely to be contained to some degree from the stimulus measures and should the global economy also start to bottom out.
“On that note, unemployment rate is likely to hover between six and eight per cent in 2020.”
Similarly, MIDF Research maintained its unemployment rate forecast at four per cent for the year, with unemployment to remain high over several months.
The research house said some companies may have to resort to retrenching its employees to manage operating costs due to concerns over less encouraging revenue moving forward as overall economic activities will take time to fully recover.
“With activities in the economy gradually restarted and began to pick up, measures taken by the government through stimulus packages such as wage subsidy, employment insurance scheme and reskilling and upskilling initiatives will support employment to be more stable in the second half of 2020,” it said.