As we usher in 2025, the new year brings optimism to Malaysia’s labour market, reflecting economic resilience despite prior uncertainties. The economic outlook for the fourth quarter of 2024 highlighted both encouraging progress and mixed signals, necessitating cautious interpretation.

Bank Negara Malaysia’s 2025 forecast highlights strong gross domestic product (GDP) growth, projected at between 4.5% and 5.5%, paired with an anticipated drop in the unemployment rate to 3.1%, marking its lowest level in a decade. Inflation is expected to stabilise within the range of 2% to 3.5%, supported by effective price control policies. These indicators suggest a stable and growth-oriented trajectory for the nation’s economy. On the global front, adaptive labour market policies will be crucial in managing economic changes. Social Security Organisation (PERKESO) serves as a key body in the implementation of the policy, undertaking the critical role of monitoring unemployment rates alongside metrics such as loss of employment (LOE) and job placement outcomes.

As an agency under the Ministry of Human Resources (KESUMA), PERKESO provides social protection under Act 4, Act 789, Act 800 and Act 838. By systematically collecting monthly data from contributors under these Acts, PERKESO gains essential insights into private sector employees and employers, enabling reliable labour market projections. KESUMA also supports the development of a healthier labour market by strengthening vocational training, aligning education with industry needs and introducing initiatives to build a productive and competitive workforce.

The unemployment rate trend in 2024 was consistent with previous forecasts. The same model continues to be used in 2025 (see Figure 1).

Since Malaysia’s transition to the endemic phase of Covid-19 in April 2022, the unemployment rate has been on a gradual decline. By 2025, the unemployment rate is expected to gradually decline from 3.26% to 3.21%, returning to pre-pandemic levels. This improvement is supported by positive GDP growth, stable inflation rates and the Overnight Policy Rate (OPR). Among key sectors, Agriculture is projected to experience a 5.98% labour force growth, followed by Manufacturing at 2.69%, while Self-Employed remains relatively stagnant at 0.37%, accounting for an estimated 5.93 million workers.

Geopolitical uncertainties pose risks, however, to these projections. A risk factor of 0.45 percentage points was identified in a time-series analysis, drawing parallels with the dotcom bubble crash of 2001. Such risks, particularly heightened trade tensions between the US and China, could disproportionately affect the technology sector during President Donald Trump’s administration.

Forecasting inherently involves uncertainty, especially in a dynamic economic landscape. PERKESO’s labour market AI models are designed to analyse the dynamic changes in GDP growth, inflation rate, OPR and bank lending rate, allowing for accurate prediction of the unemployment rate for informed decision-making. The productivity level, labour market and living costs are closely interconnected, hence the prediction for the unemployment rate is analysed in 10 scenarios (see table).

Two AI models evaluate that the unemployment rate will remain within the forecast trend. For instance, in Scenario 3, characterised by strong GDP growth alongside elevated inflation and stable interest rates, AI models predict the unemployment rate to range between 3.18% and 3.23%, maintaining alignment with broader forecasting trends.

Data from PERKESO’s MYFutureJobs portal highlights encouraging trends, with job vacancies projected to surge from 1.7% in mid-2024 to 9.7% in 2025 (see Figure 2). It signals that employers are responding to the dynamic shift in the economy, which was different six months prior with no significant vacancy growth. The Construction and Agriculture sectors, which are more resilient to global geopolitical pressure, strongly lead the demand for employment opportunities.

Conversely, forecasts for LOE indicate an increase, with job losses anticipated to rise from 10.8% in 2024 to 13.3% in 2025 (see Figure 3). The Manufacturing and Service sectors are likely to lead this trend, owing to ongoing corporate restructuring, voluntary separation schemes and cost-cutting measures, compounded by the sensitivities of global trade.

Comparing mid-2024 forecasts, the prior stagnation in job vacancies signified a hiring pause as businesses awaited clearer economic direction. The current upward trend in vacancies marks a shift towards recovery, offering optimism for the labour market.

Moreover, emerging “sunrise jobs” in 2025 suggest significant growth in specialised roles, including travel and tour agents, architects, civil, M&E and construction professionals, oil and gas and chemical professionals, healthcare professionals, project managers, pilots and flight engineers, and steel and metal specialists, underscoring diversification in the job market.

The economic outlook for 2025 remains optimistic, with the unemployment rate projected to return to pre-pandemic levels of 3.23%. While geopolitical tensions present risks, particularly in the technology sector, the overall labour market shows strong recovery signals.

Job vacancies are expected to grow substantially, driven by post-pandemic recovery, especially in Construction. The rise in job losses highlights, however, the ongoing challenges in certain sectors. Encouragingly, the emergence of new opportunities in Agriculture, Tourism and Healthcare offers hope for a more robust and diverse labour market. Despite potential hurdles, 2025 stands as a year of cautious optimism for Malaysia’s labour market and economic landscape.