PETALING JAYA: While Malaysia’s labour market is expected to remain under pressure over the coming months, economists believe that the country’s unemployment rate may be past the peak.

The recent employment data for the month of May was not entirely positive but it has shown some signs of hope in the labour market.

The jobless rate grew at a slower pace, manufacturing jobs rose for the first time in three months on a month-on-month basis and the number of individuals who were not working temporarily more than halved compared to April.

Speaking with StarBiz, Bank Islam chief economist Mohd Afzanizam Abdul Rashid believes that the unemployment rate should have peaked sometime in May or June, and should decline in the coming months albeit gradually.

“We are projecting that the unemployment rate could end the year between 4% and 4.5%.

“This is still weak as there are more people who would remain jobless compared to last year, ” he said.

Maybank IB Research team of economists, led by Suhaimi Ilias, said in a note that the country’s unemployment rate is forecast to peak at 6% in June 2020.

It is then expected to ease slightly to 5.5% in July 2020 and hover around 5% in August-December 2020 to give a full-year average unemployment rate of 4.8%.

“Year-to-date, jobless rate averaged 4.1%.

“Year-to-date retrenchments exceeded full-year 2019, ” the research firm said.

Latest data from the Social Security Organisation showed the number of people who reported loss of employment - the basis for official retrenchment statistics - was 58,275 as at July 1 as compared to 40,084 for full-year 2019.

In May 2020, the national jobless rate hit 5.3%, up from 5% in April.

Meanwhile, the number of unemployed individuals rose to 826,100.

However, despite the increase in the numbers of unemployed by 47,300 from April, it was still lower compared to the 168,300 rise between March and April when the unemployed number rose to 778,800 in April.

Looking ahead, the labour market remains under pressure, according to AmBank Group chief economist Anthony Dass.

Dass, who is also a member of the Economic Action Council secretariat, said uncertainty remains high, with growing concern of the second wave of Covid-19.

Risk of political uncertainties, the impact on the economy post loan moratorium and the end of wage subsidy will weigh on the job market

“However, the upside to the unemployment rate is likely to be contained to some degree from the stimulus measures and should the global economy also start to bottom out.

“On that note, the unemployment rate is likely to hover between 6% and 8% in 2020, ” he said.

Dass, however, told StarBiz that it would be difficult to predict whether the unemployment rate has peaked at the moment.

“We have to wait and see post-moratorium, ” he added.

For context, the six-month loan moratorium - an instrumental component of the government stimulus packages - is due to end in September.

Commenting on the post-moratorium impact on the labour market as businesses will resume repaying their loans, Bank Islam’s Mohd Afzanizam said that there is always a possibility for companies to cut their staff headcount to cut costs.

“Sectors such as tourism and aviation would continue to face challenging prospects as foreign tourists are still barred from entering the country.

“I think the impact will be selective. Those industries who have benefitted from the gradual reopening of the economy should do well and in the process, they would need more manpower to cater for the higher demand, ” he said.