PETALING JAYA: Despite improving job statistics, economists believe that the declining unemployment figures do not represent a reflection of a resilient economy. At least, not yet.
Malaysia University of Science and Technology economics professor Geoffrey Williams noted that unemployment levels have fallen to normal pre-pandemic levels and that the labour force participation rate (LFPR) has risen to record levels.
However, he said that this “did not reflect a buoyant economy” as economic growth is barely 4%.
“Instead, it reflects the rising cost of living so that many people are taking whatever jobs they can at whatever salary. More people, including youths, are joining the labour force to help support household incomes,” he told StarBiz.
According to Bank Negara, the economy grew 3.3% in the third quarter of last year, while the overall economy expanded by 3.9% in the first three quarters of 2023.
With a higher LFPR, Williams said salaries will remain stagnant.
“Some companies will also be waiting for the progressive wage model, but this will not come until 2025 or 2026.”
Williams said it is likely that targeted subsidies, as cash transfers, will come earlier.
“These might also hold down wages, because employers will not need to raise salaries if they are topped up by targeted cash transfers.
“So there will be a spur to employment and LFPR, but not so much to wages across the board.”
In light of this, Williams believes that the labour market “will remain uninteresting” in the first quarter of 2024 and for most of the year.
Malaysia’s unemployment rate returned to the pre-pandemic level of 3.3% last November, according to the latest data by the Statistics Department.
Centre for Market Education chief executive officer Carmelo Ferlito said Malaysia’s unemployment rate is not yet at the historically low levels of 2014-2015.
“However, we are very close to the natural rate of unemployment, which for Malaysia is 3% and thus, the unemployment gap is as little as 0.3%.
“I think that, in general, we have reached the post-lockdown stabilisation rate and we should not experience major changes in the near future, unless some exogenous factor kicks in,” he said.
Ferlito noted that there has been a lot of talk about the possibility of a global economic slowdown.
“This is just the natural consequence of the anti-inflation measures which had to be adopted as a counter-action against the numerous lockdown policies.
“The stimulus packages created some artificial growth and employment. We have to see how strong eventually the global slowdown will be and what will be the effect on the Malaysian economy.”
Meanwhile, MIDF Research in a recent report said it expects the average jobless rate to be at 3.4% in 2024. “The labour market in Malaysia is expected to strengthen further in 2024 and 2025, backed by encouraging momentum in the domestic economy and recovery in external trade.
“Malaysia’s average unemployment rate is expected to maintain at 3.4% in 2024 and 3.3% in the following year.”
The research house said the return of non-citizen workers is expected to boost overall employment and reduce the jobless rate. “As of the third quarter of 2023, non-citizens’ employment was almost 0.8% lower than pre-pandemic levels.”
Until November 2023, MIDF Research said employment had grown 2.4% year-on-year, while unemployment reduced by 8.3% year-on-year.
The jobless rate averaged at 3.4%, it said.
“The downside risks to Malaysia’s labour market, among others, are weaker-than-expected external trade recovery and a nose-dive of global commodity prices.”
Hong Leong Investment Bank Research, meanwhile, said the job landscape in 2024 is expected to continue on its improving trend modestly.
It said the job market will be sustained mainly by stable domestic demand, amid further recovery in tourism activities, implementation of national projects and positive foreign direct investment momentum.
