Labour market on steady path to recovery says experts

KUALA LUMPUR – Kenanga Investment Bank Bhd forecasts a steady recovery of the labour market in 2022.

It stated that this is supported by increased vaccination rates, easing of pandemic-related restrictions, reopening of borders, and various governmental supportive measures.

Therefore, the research firm maintained its prediction for unemployment at 3.9% this year, down from the 4.6% in 2021.

“However, downside risks remain connected with a possible rise in COVID-19 instances caused by new variants, the Russia-Ukraine situation, and China’s economic slowdown as a result of its zero-COVID policy.

“Given these circumstances, we expect the unemployment rate to stabilise at 3.9% this year,” it stated in a note released recently.

According to the research firm, the unemployment rate fell to 4.1% in February, while overall unemployment declined to 671,800 people, down from 4.2% and 680,400 in January.

February unemployment was the lowest since March 2020, with the number being almost at pre-pandemic levels.

Total unemployment reduced by 1.3% month on month in February. This is compared to the -1.0% in January, marking the seventh consecutive month of declines and the fastest pace since November 2021. Kenanga believes this indicates an ongoing labour market recovery bolstered by the relaxation of pandemic constraints along with a higher vaccination rate.

Meanwhile, AmBank Research anticipates structural hurdles and a decline in employment in certain industries, though positive factors such as the reopening of international borders and the government’s initiative would bolster labour market recovery.

The research house explained that employment showed recovery in the services sector, particularly the food and beverage; wholesale and retail; and transportation and storage.

However, the agriculture; and mining and quarrying sectors continued to mark a decline in employment.

“Agricultural employment is likely to recover at a slower pace. This is because the reliance on foreign employees remains strong, while automation adoption remains slow,” the research note stated.

Furthermore, the research firm said that despite the fact that foreign employees are permitted to return to Malaysia, the approval rate remains low. This affects industries such as plantation, construction, and selected manufacturing.

“Overall, we estimate Malaysia’s unemployment rate to fall to 3.9% in 2022, below the Bank Negara Malaysia’s forecast of 4.0%,” it added.

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