PETALING JAYA: The labour market is expected to maintain its resilient momentum heading into 2026, bolstered by steady domestic demand, rising labour participation, and continued recovery across key economic sectors, say economists.
They anticipated that robust hiring in services and manufacturing would anchor employment growth, even as external uncertainties and structural frictions persisted.
According to TA Research, the labour market remains on a firm upward trajectory and may record its strongest performance in over a decade.
It noted that the strength of job creation is underpinned by “steady economic growth, rising labour demand, and continued recovery in key sectors such as services and manufacturing”.
TA Research projected the unemployment rate to ease to around 2.9% by end-2025, assuming the current positive momentum continues.
“For the year as a whole, we maintain our forecast for the unemployment rate to average at 3%, with potential improvement to 2.8%-3% in 2026 as employment conditions strengthen further,” it said.
Malaysia’s latest data show the job market remained firm in September 2025, with the unemployment rate holding steady at 3%, as it was in the preceding month, while the number of unemployed persons fell for a second consecutive month to 518,600.
Total employment expanded by 3.1% year-on-year (y-o-y) to 17.03 million, reflecting gains across all major sectors.
Meanwhile, Hong Leong Investment Bank (HLIB) Research highlighted that despite an uptick in loss of employment in October, overall labour demand stayed strong.
“Total job vacancies also climbed to 124,900 (September: 111,500), marking the largest increase in nine months,” it said.
The research house observed that the concurrent rise in both loss of employment and job vacancies could indicate frictional or structural mismatches in the job market.
The higher vacancy levels signalled that underlying labour demand remained strong amid a steady economic outlook.
HLIB Research expected the stable job conditions to drive domestic consumption and economic growth, underpinned by employment and wage growth, as well as income-related policy measures.
It added that easing global policy uncertainty – following the US Senate’s recent move toward a government reopening – could further bolster external demand.
Reflecting confidence in macroeconomic stability, the brokerage said: “We maintain our expectation for Bank Negara Malaysia will hold the overnight policy rate at 2.75% until the end of 2026.”
Apex Research also maintained a positive tone, noting that with the unemployment rate averaging 3% in the first nine months of 2025, it maintained its 2025 forecast at 3% (2024: 3.2%), consistent with full employment.
It expected the resilient labour market to continue supporting private consumption and overall growth, underpinning its gross domestic product (GDP) growth forecast of 4.5% for 2025 (2024: 5.1%).
“For 2026, GDP growth projection is maintained at 4.1%, while we introduce a new unemployment rate forecast of 3.1% as tariff effects become more apparent,” it added.
In a sectoral breakdown, Apex Research noted that hiring momentum in the services industry – which makes up nearly two-thirds of total employment – is expected to stay firm, supported by resilient consumer spending and steady investment flows amid ongoing policy support.
It projected services GDP to expand by about 5% y-o-y in both 2025 and 2026.
The manufacturing sector, while facing tariff-related risks, had fared better than expected, with nominal exports up 6.8% y-o-y in the third quarter of 2025.
However, the research house cautioned that “October manufacturing purchasing manufacturers’ index pointed to a marginal reduction in staffing, suggesting uneven hiring momentum within the broader sector”.
