KUALA LUMPUR (July 10): Malaysia’s unemployment rate stayed at 3.5% for the fourth consecutive month in May, signaling resilience in the labour market, supported by an upbeat domestic economic momentum and an expansionary external front. But employment growth is expected to moderate in the second half of the year (2H2023) as external trade slows.

Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the statistics show that Malaysia is currently in full employment, with Labour Force Participation Rate also sustained at 70% in May. “This should bode well for domestic demand, as employees will continue to receive a stable income stream, which can be beneficial for consumer spending,” he told The Edge when contacted.

MIDF Research likewise said that the strengthening job market will further reinforce consumer consumption and support overall gross domestic product (GDP) growth for the year. 

“However, we expect slight moderation of employment growth in 2H2023 due to a slump in external trade performances,” said the research house in a note on Monday (July 10).

The number of employed persons in May increased 0.18% to 16.28 million persons, from 16.25 million persons in April, according to data from the Department of Statistics Malaysia (DOSM).

It is worth noting, however, that although the growth rate was a slight increase from the 0.17% seen in April, it remains lower than the 0.21% posted in March and the 0.19% uptick in February.

“Concluding the overall labour force situation in May 2023, as the Malaysian economy is expected to face challenges due to the uncertain global economic position, depicted by the Malaysian Leading Index indicators in April 2023, the labour market is also seen as facing hindrances. Therefore, the labour force is expected to grow at a modest pace in the coming months,” said DOSM in a statement on Monday.

Malaysia’s job vacancies, meanwhile, are likely to trend lower going forward, due to external trade weakness in 2H2023, said MIDF.

“Malaysia’s job vacancies registered below 200,000 for the first time since August 2021, reflecting tightness of the job market and we can expect a moderating pace in employment growth in 2H2023,” it said.

MIDF foresees average job vacancies to hover between 150,000 to 250,000 per month this year, versus 396,300 last year.

Having said that, MIDF said the labour market in Malaysia is expected to strengthen further in 2023 and 2024, underpinned by encouraging momentum in the domestic economy, albeit with moderating employment growth.

The firm forecasts the unemployment rate to average at 3.5% this year and return to the pre-pandemic 3.3% in 2024.