Unemployment rate in Malaysia stable at 3.4%

KUALA LUMPUR: Malaysia’s unemployment rate was steady at 3.4% for the third consecutive month in February 2016, but remained the highest since November 2013.

Seasonally-adjusted rate was also stable at 3.2% (January 2016: 3.2%).

Maybank IB Research expects unemployment rate to average 3.5% in 2016, from 3.2% last year.

Total labour force increased at a slower pace +1% year-on-year to 14.7 million while employment growth moderated slightly to +0.7% year-on-year to 14.2 million. 

The rise in the number of unemployed decelerated to +9.7% year-on-year to 506,000 in February compared with +11.4% year-on-year in January. 

On a month-to-month basis, all the numbers of labour force, employment and unemployed increased by +0.4%, +0.3% and +1.0% respectively.

The Labour Force Participation Rate moderated slightly to 67.6% in February 2016 from 67.7% last month. 

Workers retrenchment in March-April 2016 were dominated by the manufacturing sector. Intel Malaysia plans to cut about 10% of the 13,500 workers in both Penang and Kulim manufacturing plants, in line with Intel US’ announcement on plans to reduce its global workforce by 11% of its entire workforce of about 107,000. 

Megasteel Sdn Bhd (subsidiary of Lion Group) issued 200 factory workers a 24-hour notice of termination on April 1, 2016. In March 2016, British American Tobacco (BAT) announced the closure of its manufacturing plant, affecting 230 employees. 

The freeze on new foreign workers intake has caused concerns for various employers and business associations, especially from the manufacturing, construction and plantation/agriculture sectors.

The Federation of Malaysian Manufacturers (FMM) reported that 84% of manufacturers were facing shortage of labour. Also, operating costs has increased for manufacturers as some have to run on overtime or even outsource parts of their operations due to lack of manpower. 

The Malaysian Fruit Farmer Association said that drought and shortage of manpower had caused fruit production to fall and indirectly driving up local fruit prices. Members of the Free Industrial Zone, Penang Companies’ Association (Frepenca) which consists of 70 local and multinational corporations in the semiconductor and electronics industries are considering lowering investments in Malaysia due to the freeze on foreign labour.