Pressure mounts on labour market


Labour force

PETALING JAYA: Unemployment is expected to pick up in the near term as the labour market comes under pressure amid the lockdown.

AmBank Group chief economist Anthony Dass said although unemployment improved in April to 4.6%, pressure is growing for it to rise again going forward.

While manufacturing is allowed to operate at 60% capacity under the movement control order (MCO) 3.0, supply chain disruptions and restrictions on non-essential businesses are pointing to slower growth and higher unemployment, he added.

“Unemployment could inch back to around 5% before it starts to soften as the economy gains momentum.

“Much will depend on the vaccination speed and management of this Covid-19 pandemic.

“A continuous lockdown will impact the economy further and could act as a push factor for some businesses to shift operations to their parent company while some may move to alternative countries, ” Dass (pic below) said.Unemployment fell for the second straight month to 4.6% in April compared with 4.7% in March, the lowest since September 2020.

The improvement was supported by the recovery and conditional MCOs in most states. This allowed more businesses to continue their activities in full capacity while adhering to strict standard operating procedures.

Hence, jobs created in April were 12, 200 persons. This brought the total number of jobs created for the first four months of 2021 to close to 137, 000 (about 353, 000 jobs were lost in 2020).

The labour force participation rate (LFPR) stood at 68.6% despite an increase in the number of the labour force.

While May should witness a favourable job market trend, the challenge would be in June, with the imposition of MCO 3.0, Dass added, noting that it is expected to have knock-on effects on the labour market.

Kenanga Research is maintaining this year’s unemployment rate forecast at 4.3% compared with 4.5% last year.

The research house added that the labour market is expected to remain under pressure in the near term on the back of surging Covid-19 cases and the reimposition of nationwide MCO 3.0 from May 12, followed by the lockdown until June 14.

Nonetheless, it felt that the impact is expected to be less severe than the MCO 1.0 as more sectors are allowed to resume operation as well as from continued support from government measures.

“This is reflected in the latest data from MyFutureJobs as the number of loss of employment or LOE eased to 3, 724 in May (April: 4, 963) despite surging infections.“Likewise, the labour market will be supported by the progress of the vaccination campaign and sustain expansion in the manufacturing sector, particularly the export-related sector backed by stronger demand from advanced economies and technology upcycle, ” Kenanga said.

Employment growth expanded for the fifth consecutive month (0.1% month-on-month; March: 0.4%), albeit at a slower pace, according to the research house.

The growth was associated with an upward trend in the number of employed persons in the services, manufacturing and construction sectors.

As for the advanced economies, Kenanga pointed out that there was an easing of unemployment.

For example, the US unemployment rate eased in May at 5.8% April (6.1%), the lowest since March 2020 as employers added 559, 000 jobs.

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