Malaysian unemployment rate will not see double-digit spike
PETALING JAYA: Unlike what has been witnessed in countries badly affected by the Covid-19 pandemic, unemployment in Malaysia will not see a double-digit spike, despite more unfavourable labour market news anticipated in the coming months, according to Sunway University Business School Professor of Economic Dr Yeah Kim Leng.
Latest figures released by Malaysia’s Department of Statistics showed April unemployment hit 5% – the highest level seen since March 2009 – from 3.9% reported in the previous month.
This was attributed to the closure of operations for most businesses due to the implementation of the movement control order (MCO) which resulted in loss of employment and the inability to secure employment by job seekers.
He projected that the transition to the recovery MCO (RMCO) phase, which saw the reactivation of business for more sectors and the resumption of interstate travel, will ease the downward pressure on unemployment as most businesses are allowed to operate.
“However, subdued consumer spending, decline in external demand and continuing fear of virus resurgence will keep a lid on business and household spending from returning to normal,” Yeah told SunBiz.
On the whole, he opined that the expected recovery has been further delayed to the second half of next year due to the fact that the pandemic is likely to linger for a longer time than expected in most countries, thus hindering a quick economic recovery.
The professor pointed out that the hard-hit industries with weak growth prospects and inadequate business volume will force marginally profitable firms to reduce workforce and adjust to the lower demand.
Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said the surge in unemployment is not a surprise.
“In the months ahead, the unemployment rate is expected to rise further to around 5.5-6.5%,” he said. “Many businesses, especially SME have laid off workers to reduce operating costs.”
Similarly, BIMB Securities Research expects labour conditions to be affected in May and worsen in the second quarter of 2020.
It pointed out that the government, in addressing these issues, has taken initiatives to improve the situation with the Prihatin and Penjana economic stimulus packages, which bring the total fiscal package to RM295 billion or 20% of gross domestic product.
“In line with the measures taken by the government including the implementation of the CMCO and RMCO and the implementation of Prihatin and Penjana, it is expected that business operations and the labour market will gradually recover starting June 2020,” the research house said in a report.
With the expected recovery in economic activities in the second half of this year, it explained that the labour market should gradually improve in tandem, with rehiring and job creations in some sectors, given the gradual lifting of MCO.
“Under CMCO and RMCO we will see improvement in employment to rehiring in varying levels across different economic sectors,” said BIMB Securities Research.
It believes the job market will slowly recover as the government starts to open up the economy and the fear surrounding Covid-19 begins to subside.
The research house’s outlook for the overall unemployment rate remains unchanged at 3.8% with upside risks at end-2020 should the Covid-19 pandemic be more severe and protracted.
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