Kenanga Research projectes the unemployment rate to remain stable for the rest of this year,
PETALING JAYA: Malaysia’s labour market is poised for steady growth in 2025, with the unemployment rate projected to improve amid resilient domestic demand, rising tourism and record government spending.
Key sectors, including manufacturing and services, are set to drive job creation, though skill mismatches and global uncertainties remain pressing challenges, according to research houses.TA Research and Kenanga Research forecast the unemployment rate to average at 3.2% in 2025, an improvement from the projected 2024 average of 3.3%.
BIMB Research, on the other hand, expects the country’s jobless rate to remain steady at 3.3% next year, unchanged from this year’s expected figure.
“The nation’s labour market performance showed a steady upward trend, complemented by a stable labour force participation rate and encouraging economic growth.
“This scenario is expected to keep raising the demand for jobs, stabilising the economy and creating new employment opportunities.
“The labour market is set for further improvement, building on the momentum gained from the government’s efforts to foster job growth and economic stability,” TA Research wrote in a report yesterday.
Despite the improving jobless rate next year, the research house noted that there is still one critical challenge remaining: the mismatch between skills and job-market requirements.
“Despite the overall positive trends, the mismatch continues to constrain the full realisation of the labour market’s potential. Many employers report difficulties in filling vacancies for high-skilled roles, while job seekers increasingly accept low-skilled jobs,” TA Research said.
The research house said the trend was reflected in the growing share of low-skilled workers in the labour market, which rose from an average of 12% in 2021 to 13.2% in the first nine months of this year.
Malaysia’s unemployment rate stayed at 3.2% in October for the third straight month, matching the pre-pandemic level and reflecting a stable labour market.
This brought the 10-month average to 3.3%, with Kenanga Research projecting the unemployment rate to remain stable for the rest of this year, driven by resilient domestic demand amid the festive period and increased tourist arrivals.
“For 2025, employment growth is expected to be driven by the service sector and steady expansion in manufacturing, driven by realised investments and the ongoing global tech upcycle.
“Government spending, with a record RM421bil in Budget 2025, will provide additional support to employment,” Kenanga Research said.
The research house noted that given October’s low unemployment rate, which continued to underpin domestic demand, it maintained its 2024 gross domestic product growth forecast for Malaysia at 5%, up from 3.6% in 2023.
“Growth is projected to moderate to 4.8% in 2025, reflecting rising global economic uncertainties following changes in the US administration,” Kenanga Research said.
BIMB Research said Malaysia’s labour market remained on a strong upward trajectory, fuelled by robust economic expansion and a stable labour participation rate.
It said 2025 promises continued stability in the labour market, underpinned by stronger domestic growth and improved trade prospects, with the unemployment rate expected to stay low.
“Malaysia’s tourism sector is set for a significant boost, thanks to 10 new international flights and strategic initiatives like Visit Malaysia 2026 and its role as Asean chair in 2025.
“These factors will not only enhance the nation’s global appeal but also generate job opportunities and support economic growth,” the research house said.
However, it acknowledged that challenges remain.
“Geopolitical uncertainties, a sluggish trade recovery and the potential return of Trump-era policies could impact Malaysia’s manufacturing sector – the nation’s second-largest employer after services,” it said.
“Despite these risks, Malaysia’s labour market remains a critical pillar supporting domestic spending and economic resilience in the years to come,” it added.
