PETALING JAYA: Malaysia’s labour market is expected to stay on a firm footing into 2026, with economists projecting further gains in employment and a gradual decline in joblessness as economic momentum persists.
The unemployment rate is forecast to ease towards the high-2% range next year, underpinned by steady domestic activity, resilient exports and continued policy support.
Research houses say the improving outlook reflects a confluence of cyclical recovery and structural reforms.
In a report, TA Research said Malaysia’s labour market resilience in the coming months would be supported by steady economic expansion, sustained labour demand, and continued recovery in key sectors, particularly services and manufacturing.
“Macroeconomic conditions have remained supportive, with 2025 gross domestic product growth likely exceeding 5%, generating positive spillover effects into labour demand and job creation,” it noted.
For 2026, the brokerage projected the unemployment rate to improve further to an average of 2.8%, reflecting sustained economic momentum, stronger private investment, and ongoing structural reforms.
“Continued policy support, accelerated skills upgrading, digitalisation efforts, and rising private-sector participation should further reinforce labour market stability,” it added, pointing to a stable and increasingly robust employment environment over the medium term.
The Statistics Department reported that the unemployment rate held at an 11-year low of 2.9% in December 2025, while total employment expanded by an average of 3% year-on-year to 16.92 million in 2025.
The number of unemployed fell 5.1% to 523,200, keeping the annual jobless rate stable at 3%, amid broad-based hiring across key sectors.
Meanwhile, Apex Research expects strengthening domestic activity, alongside an improving external backdrop, to continue supporting labour demand.
It said stronger tourism flows under Visit Malaysia 2026 should spur hiring in accommodation, transportation, and retail, while record cash assistance of RM15bil in 2026 – up from RM13bil in 2025 – via Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah will lift household incomes and spending.
Externally, Apex Research said global growth driven by artificial intelligence-led technology upcycle should benefit export-oriented manufacturing, especially electrical and electronics.
“Although Malaysia’s January manufacturing purchasing managers’ index indicated a marginal reduction in hiring after December’s surge, manufacturers’ improved optimism on demand and new orders points to near-term support for manufacturing employment,” it said.
“Overall, resilient labour market conditions remain supportive of consumption momentum,” it added, revising its 2026 unemployment rate forecast to 3% from 3.1%.
It maintained its GDP projections of 4.7% for 2025 and 4.3% for 2026, and expects Bank Negara Malaysia to keep the overnight policy rate (OPR) at 2.75% through next year.
Meanwhile, one analyst told StarBiz that although leading indicators point to continued resilience, the labour market is unlikely to be fully insulated from external market risks.
“That said, firm domestic consumption, ongoing infrastructure rollouts and tourism-related hiring should provide sufficient support to keep overall unemployment low this year,” he said.
