PETALING JAYA: Malaysia’s labour market is expected to remain steady throughout 2025, well supported by strong domestic demand.
Analysts said this would be driven by higher minimum wages and increased government salaries, which are expected to boost private consumption.
In February, the latest labour market data also continued to strengthen, given sustained economic momentum and resilient domestic demand.
The number of unemployed persons saw a decline by 0.2% month-on-month and down 4.3% year-on-year, albeit at a slower pace. Consequently, the unemployment rate was unchanged at 3.1% in February compared with January.
According to Kenanga Research, 2025 unemployment rate is forecasted to remain at 3.1% versus 3.3% in 2024, as “domestic demand is expected to sustain”.
Private investment is also expected to remain robust, backed by national policy initiatives and record-high approved investments last year, the research house said in a report yesterday.
Furthermore, ongoing recovery in tourism-related activities and record-high federal government spending under Budget 2025 will further support the economy.
However, risks from global trade tensions could dampen hiring in the export-oriented manufacturing and mining sectors, said Kenanga Research.
On the gross domestic product (GDP) growth, the research house said “our base case 2025 GDP forecast remains at 4.8% (2024: 5.1%) despite heightened global trade uncertainty”.
It also pointed out that the services sector continues to drive domestic growth, reflected in steady hiring and expanding retail sales in February.
“However, if (Donald) Trump’s tariff threat escalates into a full-blown trade war, it could harm the manufacturing export-oriented sector, potentially lowering GDP growth,” it added.
Meanwhile, Hong Leong Investment Bank (HLIB) Research in a note to clients said: “The late data indicate continued employment growth across sectors.”
However, the research house cautioned that the downside risks remain, primarily stemming from ongoing global policy uncertainty particularly on the trade front.
“This could prompt export-oriented firms to adopt a more cautious stance regarding hiring plans.
“Despite these external challenges, Malaysia’s labour market is expected to be supported by steady domestic demand,” added HLIB Research.
Furthermore, the government measures will also play a role, including the rollout of additional cash handouts, implementation of revised minimum wage and adjustments to civil servant wages.
“These initiatives are expected to provide a buffer for household spending and reinforce domestic economic activity,” said the research house firm.
Similarly, Maybank Investment Bank Research (Maybank IB) also projects a stable labour market in 2025 amid potential challenges from evolving global trade uncertainties.
“We maintain our full-year unemployment rate at 3.2% in 2025 (2024: 3.3%).”
The job market, which is considered to be at “full employment” from the perspective of the unemployment rate, coupled with Budget 2025 measures to lift workers income – for example, Phase 1 of civil service pay rise on Dec 1, 2024, and monthly minimum wage hike to RM1,700 (from RM1,500) on Feb 1, 2025 – augur well for consumer spending outlook, explained Maybank IB.
“Hence, we expect real private consumption to grow by 5.5% in 2025 (2024: +5.2%),” the research house noted.
According to Maybank IB, the nation’s diverse economic foundation and forward-thinking policies have created a robust labour market.
The recent civil service workers wage adjustments and national minimum wage increases have further strengthened employment conditions.
This is in line with the 12th Malaysia Plan’s focus on education and industry development which promises to generate quality jobs and tackle wage stagnation.
In addition, the government reforms are reshaping the workforce landscape by promoting inclusivity, reducing foreign labour dependence, and embracing automation.
It noted that targeted upskilling programmes and strategic incentives were also boosting workforce adaptability and efficiency, despite ongoing challenges with skills mismatches.
Moving forward, Maybank IB expects Malaysia’s labour market to remain stable on the ground of strategic investments in high-growth, high-value industries and an unwavering commitment to innovation-driven industrial policies.
