KUALA LUMPUR (Aug 9): Malaysia's labour market is expected to strengthen further in the second half of this year, after the unemployment rate in June 2022 fell to the lowest level since Covid-19 hit the country at 3.8%, according to economists. 

Citing the Malaysian Labour Force Statistics for June 2022 released by the Department of Statistics Malaysia, Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed said the number of unemployed persons fell to 630,600 in June, from 637,700 persons in the previous month.

The labour force situation was more stable after the number of employed people increased 0.2% to 16.57 million, from 16.54 million in May, he said.

MIDF Research wrote in a note on Tuesday (Aug 9) that Malaysia’s labour market is expected to continue recovering in 2H22, supported by robust domestic demand, reopening of international borders, revival of construction projects, expansion of primary sectors amid high global commodity prices, and steady external trade activities.

As a result, the research firm projects that the country's unemployment rate will trend down to 3.8% this year, from 4.6% in 2021. However, the projected unemployment rate is still higher than the pre-Covid 19 rate of 3.4%, the research firm said.

Employment growth is forecast at 2.5% this year, compared with 2% in 2021, while unemployment is expected to shrink by 15%, against a 3% increase a year ago, according to MIDF Research.

"As of 1HY22, jobless rate averaged at 4%, while employment growth stood at 3.3% year-on-year (y-o-y) and unemployment fell by 13.5% y-o-y,” added the research firm. 

On the other hand, Julia Goh, a senior economist at UOB Global Economic and Market Research, said despite the recorded improvement, the employment outlook “waned” in June amid more cautious consumer and business sentiment. 

In an emailed response to theedgemarkets.com's queries, Goh stressed that elevated costs, supply chain disruptions and rising recession risks could “moderate” the recovery in employment numbers.

“Despite multiple external headwinds, we remain cautiously optimistic on the economic growth outlook in 2H22, supported by reopening drivers in Malaysia and across the region, as well as robust trade and cross-border investments. As such, labour requirements should continue to increase across the spectrum of skills and industries. 

“We maintain our year-end unemployment rate target of 3.6% (BNM's estimate is around 4%),” she said.