PETALING JAYA: The labour market is expected to remain resilient through 2026 despite emerging signs of softer hiring momentum and growing uncertainty stemming from geopolitical tensions and external economic risks, according to economists.
Affin Hwang Investment Bank Research (Affin Hwang IB) expects labour market conditions to remain supported by resilient domestic demand, investment activity and continued job growth, particularly in the services sector.
“Malaysia’s labour market outlook remains favourable in the near term, supported by resilient domestic demand, sustained investment activity and continued employment growth, particularly in the services sector.”
However, it cautioned that hiring activity could moderate amid global energy market volatility, geopolitical risks and softer external demand.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said the latest labour force data suggested labour market conditions had softened, although employment trends remained broadly stable.
“The latest labour force data indicate that labour market conditions have softened,” it said.
The research house added that downside risks to growth could intensify should disruptions to shipping through the Strait of Hormuz persist.
Malaysia’s unemployment rate rose slightly to 3.0% in April 2026 from 2.9% in March, according to labour force statistics released by the Department of Statistics Malaysia.
Affin Hwang IB described the latest figures as evidence of continued labour market stability despite the increase in unemployment.
The number of unemployed persons stood at 511,800 in April, down 2.7% from a year earlier.
Total employment remained broadly unchanged at 16.82 million, while the labour force increased to 17.33 million.
The labour force participation rate held steady at 70.9% for a fourth consecutive month.
Employment growth continued to be led by the services sector, particularly wholesale and retail trade, accommodation and food and beverage services, as well as information and communication activities.
“April’s labour market showed continued stability, as LFPR (labour force participation rate) held steady at 70.9% and employment remained supported by services, despite unemployment edging higher,” Affin Hwang IB pointed out.
HLIB Research also noted that the unemployment rate remained below the pre-lockdown level of 3.3% despite the slight increase recorded in April.
The research house highlighted some deterioration in unemployment indicators, with the number of unemployed persons increasing on a month-on-month basis and longer-duration unemployment edging higher.
Analysts also pointed to signs that labour demand may be cooling.
Total jobs rose 1.8% year-on-year (y-o-y) to 9.23 million in the first quarter of financial year 2026, but the pace of job creation weakened.
“Jobs created declined by 1.5% y-o-y to 32,700, suggesting some moderation in new hiring momentum,” Affin Hwang IB said.
The softer hiring trend was also reflected in Social Security Organisation data.
Affin Hwang IB reported that job losses rose to 7,200 workers in April from 5,900 in March, while HLIB Research said loss of employment cases increased further to 7,800 in May.
