KUALA LUMPUR: Malaysia's unemployment rate is predicted to remain stable at 3.3 per cent this year with rising local and foreign investment supporting the labour sector.
The country maintained a 3.3 per cent unemployment rate as of December 2023, which was indicative of increased employment in all areas.
The normalisation of economic activity and the gradual recovery of tourism-related sectors, according to SG-UOB Global Economics & Markets study, contributed to the labour market's further improvement towards the end of the previous year.
"We note that business and consumer sentiment has turned more cautious amid ongoing external challenges, geopolitical risks, as well as several new taxes and subsidy rationalisation measures on the horizon. This could slow hiring trends in the coming months.
"Nevertheless, we continue to see positive domestic drivers supported by increased investments from foreign and domestic sources that can support the labour market," it said in a note.
It further said that enhancing tourism and increasing infrastructure spending through multi-year investment projects will spur economic growth and maintain jobs in linked industries.
There may be opportunities to develop highly skilled jobs in emerging new growth sectors such advanced technology, green and renewable energy, digital finance, and healthcare, it said.
"Given a higher gross domestic product (GDP) growth projection of 4.6 per cent for 2024 with several government enablers and job initiatives underway, we expect the unemployment rate to hold steady at 3.3 per cent by end-2024," said the firm.
The labour force participation rate edged up to another record high of 70.2 per cent in December, with a consistent increase in the number of employed.
The number of unemployed people continued to trend lower, sustaining the declining trend over the last two years.
Overall employment rose further by 26,600, or 0.2 per cent month-on-month to another fresh high of 16.45 million.
More hirings were recorded in the services sector, particularly in information and communication, food and beverage, and transport and storage activities.
The construction, mining, and quarrying sectors also saw a similar hiring trend in December.
Conversely, the agriculture and manufacturing sectors recorded declines in hiring.
Hong Leong Investment Bank (HLIB) research said Malaysia's positive economic momentum that persisted throughout 2023 had increased the need for labour.
"Going forward, we expect the labour market to remain supported by a further increase in tourism activities, the realisation of foreign direct investment (FDI) projects, and the government's other job creation initiatives," it said.
Notwithstanding the return of the monthly jobless rate to the pre-pandemic level, Maybank Investment Bank (Maybank IB) noted youth unemployment had been static since August 2023.
As at December, the rate stood at 10.6 per cent and has moved between that level and 10.8 per cent for the last five months of 2023. It was, however, still above the pre-pandemic low of 9.9 per cent in December 2019.
Informal jobs or workers such as gig workers and petty traders reached a new high of three million in December 2023, as growth in the informal sector, which rose 6.5 per cent in 2023, surpassed total employment growth of 2.4 per cent last year.
Maybank IB also stated monthly worker retrenchments have been rising year-on-year since February 2023 up to the late data as of December 2023 by 42.7 per cent resulting in a 45.6 per cent increase in 2023 to 49,982.
On the stagnant youth unemployment rate, Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said youths had moved to a new phase, with many of them being more involved in the digital economy, either in logistics, online gaming, or online business services.
"Some become freelancers, not favouring normal office hours jobs. The job preference among the youth has contributed to the change in the demographics of employment data in Malaysia.
"One of the reasons is the low salary paid to fresh graduates in the market, with almost stagnant growth over the decades, paving the way for graduates to seek alternative paths for higher income to pay study loans as well as to survive the rising cost of living. Many youths are working two jobs, trying to make ends meet," he told Business Times.
In the long run, he said the country may have to rely on foreign workers not only for the irregular jobs currently but also for foreign graduates to work in the office to overcome the skilled worker shortages.
"There is a proposal to bring overseas graduates to work in Malaysia's skilled posts, especially those who are willing to work for a lower salary than local graduates due to the gain in foreign exchange.
"It will also weaken the ringgit currency in the future as foreign workers send their earnings back to their respective countries, hence, the outflow will continue and even increase over the current repatriation of money significantly in the future," he added.
Malaysian Institute of Economic Research economist Dr. Shankaran Nambiar said surveys had indicated that youth are satisfied with working in the gig economy.
"As a short term measure, it might be good to work as an e-hailing driver or to be part of the delivery business, but as a nation, we may be falling short of our skills development targets if that is all that our youth is aspiring for," he said.