Analysts: Labour market to stay stable in 2025

New Straits Times

15-06-2025

KUALA LUMPUR: Malaysia's labour market is expected to remain stable throughout 2025, supported by resilient domestic demand, said economists.
TA Securities economist Faris Burhanuddin said that despite persistent global geopolitical tensions, the labour market remains resilient, backed by a stable unemployment rate and strong growth in the services and technology sectors, as well as increasing investments in digitalisation and automation.
"We also believe that Malaysia's labour market continues to demonstrate resilience, supported by the country's emergence as a prominent global hub for electrical and electronics (E&E) products, particularly semiconductors," he said in a note.
Farid said the government's effort to position Malaysia as a leading hub for energy and semiconductor manufacturing has attracted substantial foreign investment.
This includes a recent move by a Japanese company, which opened a manufacturing facility in Pasir Gudang, Johor, creating 460 high-skilled jobs with competitive salaries.
In April 2025, the employment rate rose by 2.8 per cent year-on-year to 16.82 million persons, according to the Department of Statistics Malaysia.
Meanwhile, the labour force participation rate increased to 70.8 per cent and the employment-to-population ratio sustained at 68.6 per cent.
Farid said that structural initiatives such as preparations for Visit Malaysia 2026 are also expected to boost tourism-related employment starting this year.
He pointed out that tourism data reinforces this positive outlook, with tourist arrivals reaching 13.38 million in the first four months of 2025, an increase of 21 per cent from 11.07 million last year and 12.4 per cent higher than the pre-pandemic level at 11.90 million in 2019.
MIDF Research said rising employment and wage growth in domestic-orientated sectors will provide support to household spending.
The firm said expansion in job creation and a healthy labour demand will be fuelled by robust domestic demand and sustained investment activities.
"Steady employment growth coupled with a lower unemployment rate suggests more job seekers are successfully securing employment, though youth employment remains a persistent challenge.
"Looking ahead, favourable labour market conditions are expected to support domestic demand and underpin economic growth despite external trade uncertainties," it said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB Research) chief economist Felicia Ling said sustained domestic demand and supportive government policies will support the labour market.
She said the continued realisation of RM89.8 billion in approved investments in the first quarter of this year is also expected to fuel job creation.
TA Securities upgrades its full-year 2025 unemployment rate forecast to an average of 3.0 per cent, while MIDF Research expects it to average around 3.1 per cent.
Despite the positive outlook, the economists remain cautious of potential external and domestic headwinds.
Ling said the downside risks remain, as ongoing global policy uncertainty may worsen domestic business sentiment.
"While we anticipate minimal impact from the Sales and Service Tax expansion taking effect on July 1, the potential pass-through of higher operational costs may prompt employers to be cautious," she added.
Farid pointed out that the escalating trade tensions, particularly between the US and China, pose downside risks to Malaysia's trade-reliant sectors such as electronics, machinery and intermediate goods.
He said this may lead to employment volatility in key export-oriented regions like Penang and Johor.
He added that Petronas' intention to right-size its workforce in response to a more challenging global operating environment adds further uncertainty.
"While the full details of the restructuring have not been disclosed, and the new organisational structure is only expected in the second half of the year, we currently view this as a limited downside risk to our labour force projections," he added.