KUALA LUMPUR – Malaysia’s unemployment rate spiked to 5% in April, breaking the full employment condition of below 4% for the first time since the global financial crisis (GFC).
MIDF Research said in a report today that the rate was a manifest of the repercussion of the full month of the Movement Control Order (MCO) where the effort to protect public health had induced a decline in economic activities that resulted in the retrenchment of employees.
“Employment fell 1.0% year-on-year (yoy) while unemployment growth soared further to 48.8% yoy.
“Employees in the manufacturing and services sectors are observed to be mostly affected,” it added.
Malaysia’s unemployment rate is expected to remain high for the upcoming months of this year as some companies are likely to retrench employees.
MIDF Research said most retrenchments were to reduce operating costs in line with the new standard operating procedures (SOP) in place and on expectations of lower revenue since consumer activities would take longer to resume fully.
“Sentiment is still quite weak as people fear of another wave of COVID-19, hence take a more gradual return to their normal activities.
“Therefore, we foresee unemployment rate to edge up higher than 3.8% previously estimated to 4.0%,” said the research house.
It said employment in the manufacturing sector had fallen 3.2% yoy in April after almost four years of positive growth.
“Employment in the manufacturing sector has been weakening for some time since 2H of 2018 with growth hovering below 2.0% yoy and it took COVID-19 to push it to negative level.
“This sector in particularly has been surrounded with multiple headwinds prior to the pandemic with the US-China trade war being the biggest risk factor.”
The research house said Malaysia plays an important role in the global manufacturing supply chain mainly for the electrical and electronic (E&E) sector, hence global lockdowns had affected the performance as well.
“About 80% of Malaysia’s exports are of manufactured goods. Therefore, lower global demand will hit this sector the most,” it said.
MIDF Research believes as the economy gradually opens and measures taken by the government through stimulus packages such as wage subsidy, employment insurance scheme, and reskilling and upskilling initiatives, the employment would be more stable in the second half of the year.