This article first appeared in The Edge Financial Daily on May 17, 2017

KUALA LUMPUR: Malaysia’s unemployment rate in March slid 0.1% to 3.4% — after persisting at 3.5% for the past three months — as domestic and global economic activities picked up, according to economists. The March unemployment rate was also 0.1% lower compared with March last year.

“Domestic economic activities remain upbeat, as reflected in the latest data of industrial production and distributive trade. Both indicators grew 4.6% year-on-year (y-o-y) and 8.9% y-o-y, reflecting steady domestic demand in the economy,” said MIDF Research in a note yesterday.

Malaysia’s exports also recorded a fifth consecutive month of double-digit growth in March, of 24.1% y-o-y, it said, indicating that greater demand arising from strong domestic and external sectors had led to higher production and more job creation.

In the March 2017 monthly Labour Force Survey conducted by the Department of Statistics Malaysia (DoSM) released on May 15, DoSM said Malaysia’s employment expanded in March to 14.42 million, while labour force grew closer to 15 million persons.

“[This] meant 20,000 new jobs were added as compared with the previous month ... [while] the unemployment numbers went down by 4,000 to 0.51 million,” said MIDF Research.

DoSM also revealed that people outside the labour force rose slightly to 32.3% in March from 32.2% of working-age population. This, according to Ambank Research in a separate report, suggested a trend of self-employment in the labour market.

Ambank Research also expects the manufacturing and services sectors to continue to support the labour market, given steady improvement in exports and domestic demand, “which translate into better sales”.

“Also, the Nikkei Manufacturing PMI (purchasing managers’ index), which snapped a 25-month run of contraction to cross the 50-mark in April, indicated a positive turnaround in the manufacturing sector.

“On the back of our 4.5% GDP (gross domestic product) growth projection for 2017, largely supported by domestic activities and improving export-led manufacturing activities such as semiconductors and resource-based manufacturing, we project the unemployment rate to improve further to around 3.3% to 3.4% in 2017 from 3.5% in 2016,” it added.

Similarly, MIDF Research said the Nikkei PMI was an indication of optimistic business confidence among manufacturers, especially in export-oriented industries, and anticipated Malaysia’s labour market to “mutually benefit and strengthen in the coming months”.

Global unemployment rate is also trending down. The US, for one, posted the lowest unemployment rate in March in almost 10 years, indicating a strengthening of the labour market amid a recovery in global trade, said MIDF Research.

“Moving forward, we anticipate domestic as well as global economic activities will stay on upward trajectory given key economic indicators are showing sign of optimism,” said MIDF Research.

Pointing to the recent victory of Emmanuel Macron, which sent positive vibes towards global economy, the research house said the development has indirectly shown that the threat of protectionism is receding.

Thus, it expected global trade to improve further this year and “Malaysia, as an export-reliant economy, will benefit”, via stronger export demand and more job creation in export-oriented industries.