KUALA LUMPUR (Sept 9): Malaysia's unemployment rate is expected to continue to fall this year as the country's transition to endemicity — with full reopening of borders and resumption of economic and social activities — will continue to drive the recovery of the labour market, economists said.

Earlier on Friday (Sept 9), the Department of Statistics Malaysia announced that the country's unemployment rate reached a new pandemic low of 3.7% (620,700 people) in July 2022.

In June, the unemployment rate was 3.8%, when 630,600 people were unemployed.

The number of employed persons continued to increase by 0.3% month-on-month to 15.98 million, compared with 15.94 million in the previous month.

Following this, senior economist Julia Goh and economist Loke Siew Ting of UOB Global Economics & Market Research revised their year-end unemployment rate forecast to 3.5% from 3.6% previously. Forecast for the 2023 unemployment rate was also revised downward to 3.2% from 3.5%.

The revision means that the Malaysian labour market is to likely fully recover to pre-pandemic levels by mid-2023 if the domestic economy grows in line with the economists' forecast of 4.8% for 2023. Note that the unemployment rate was 3.3% in February 2020, just before the nationwide lockdown kicked in.

"Most labour market indicators have improved much stronger than we had anticipated post the reopening since April this year and at a sustainable pace," they said in a note on Friday.

In addition, the government is expected to unveil some positive measures to boost investment and employment in the Budget 2023, which will be tabled on Oct 7, they said.

MIDF Research, on the other hand, maintained its unemployment rate forecast for 2022 at 3.8% — down from 4.6% in 2021 — underpinned by upbeat momentum in the domestic economy and steady expansion in the external sector.

"Employment growth is forecast at +2.5% (2021: +2%) while unemployment will shrink by 15% this year (2021: +3%). Moving forward, we opine Malaysia's labour market to stay in recovery trend as indicated by the job-vacancy rate that hit a new record high of 80.6% in June 2022."

Nonetheless, the research house believes the country's economy will remain on an upward trend in the second half of the year, supported by robust domestic demand, the reopening of international borders, the revival of construction projects, the expansion of the primary sector amid high global commodity prices and steady external trade activity.

When contacted by ^The Edge on Friday, Malaysian Institute of Economic Research senior research fellow Dr Shankaran Nambiar said: "Labour market conditions have improved, better than expected. But this trend might run into roadblocks in the months ahead. We can expect a slowdown since growth might not be as robust going forward.

"Companies seem to be complaining of imported inflation and the cost of inputs is going up. The global outlook, too, is moderate. These factors might [have an] impact on growth and in turn on [Malaysia's] employment," he added.