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Wednesday, 28 June 2017

(The Star) Economists bullish on Malaysian labour market

PETALING JAYA: Economists are still bullish on the country’s labour market amid latest statistics indicating weak and cautious online hiring.

Most economists are projecting an unemployment rate of between 3.3% and 3.4% for this year although one forecasts a slightly higher figure of up to 3.6%.

The unemployment rate in April and March this year was flat at 3.4% and averaged 3.5% in 2016.

The bullish stand is premised on a stronger first-quarter gross domestic product growth of 5.6% – the fastest pace in two years – rising exports and higher employment in the manufacturing and services as well as the information technology (IT) sectors.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias, who is projecting a 3.3% unemployment rate this year, told StarBiz that there were some indicators pointing to a slight improvement in the labour market.

“The number of people unemployed increased at a slower pace of 1.5% in the first quarter of this year, sharply below the average of 9.6% in 2016. Job vacancies have normalised, with the number the unemployed vying for every job vacancy shrinking to an average of 5.1 times, down from the peak of 24.3 times in mid-2016.

“The unemployment rate has stabilised and will likely improve in line with the economy this year,” he said.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain, however, said the labour market would still remain soft and uneven. He expected unemployment to average 3.4% to 3.6% by year-end, which is on the lower end of Bank Negara’s forecast of 3.6% to 3.8%.

“Malaysia’s unemployment rate hovered around 3.4% to 3.5% in 2016, and averaged 3.5% during the period (2016) – higher than the average trend of 3.1% between 2010 and 2015. Likewise, the unemployment rate has averaged 3.5% year-to-date in April this year. The number of unemployed people remained at above 500,000 since December 2015 compared with 513,000 year-to-date in April,” he said.

According to the Monster Employment Index, a gauge on online job postings, the online hiring sentiment remained weak. The index fell -11.0% year-on-year (y-o-y) in April 2017, the same as in March 2017, suggesting hiring activities remained cautious, although it had improved monthly from the lows of early-2016.

The index also suggested that hiring in Malaysia was uneven, as some sectors recorded strong growth, while others remained weak. The strongest job prospects in the economy based on the index were in the IT, telecommunication/Internet service providers and business process outsourcing/IT-enabled services sectors, given the continued robust sub-index growth, indicating employers in this sector were still aggressively hiring (April 2017: +11.5% y-o-y; May 2017: +13.2% y-o-y), based on a recent report by Maybank Investment Bank (IB) Research.

Manokaran noted that with the world heading towards a digital economy, companies which did not adapt to this change in time will face challenges.

Meanwhile, Sunway University Business School professor of economics Dr Yeah Kim Leng projected an unemployment rate of between 3.2% and 3.3% by year-end.

“The improving job market is already reflected by the decline in the active job seekers-to-job vacancies ratio from 2.3 times in the second quarter of 2016 to one time in the first quarter of this year based on statistics compiled by the Human Resources Ministry.

“Manufacturing and services are expected to register firmer employment growth. In particular, export-oriented industries that are experiencing strong growth and capacity constraints are expected to increase hiring,” he said.

Yeah added that retrenchment exercises in the oil and gas sector, and financial services and automotive industries have stabilised.

According to Yeah, skills requirements are changing in many industries as digitalisation and e-commerce are reshaping business models and competitive strategies resulting in a mismatch in the supply and demand of skills. Another unfavourable trend in the Malaysian labour market is that up to 70% of the registered job vacancies are in elementary occupations that are largely filled by unskilled foreign labour, Yeah said.

Maybank IB Research, in a recent note, said its full-year average unemployment rate forecast was 3.4%, adding that the 1.9% y-o-y growth in employment in April was the highest growth reported since August 2015.