Malaysia’s labour market held steady with the unemployment rate unchanged at 3.4% in Jul while the labor force participation rate rose further to a fresh record high of 70.1% (Jun: 70.0%). The jobless rate has been trending lower over the last two years albeit the pace of improvement is more gradual as the rate inches closer to pre-pandemic levels of 3.2%-3.3% in 2H19, which suggests that there remains considerable slack in the labour market.

Total employment advanced further by 27.2k or 0.2% m/m to 16.34mn in Jul (Jun: +28.3k or +0.2% m/m to 16.31mn) amid increased hiring in the services (particularly food & beverage, wholesale & retail trade, and education), construction, as well as mining & quarrying sectors. Meanwhile manufacturing and agriculture sectors recorded lower employment in the month. The employment-to-population ratio rose to 67.7% in Jul (Jun: 67.6%), signaling the ability to create employment.

Despite rising external uncertainties and lingering headwinds, we continue to see positive domestic catalysts (i.e. a gradual recovery in tourism activity, an expected upturn in global tech cycle, sustained foreign direct investment inflows, ongoing infrastructure projects, and further government measures) that will help support the labor market. With a steady jobless rate and stable labor market, we expect the unemployment rate to ease to 3.2% by year-end (BNM est: 3.3%, end-2022: 3.6%). The coming Budget 2024 that will be tabled on 13 Oct may include measures to raise middle-income wages for skilled labor.