MAY’s unemployment figures of more than 800,000 were dire enough but employers and experts said the worst was yet to come in the newly reopened economy.

Sluggish demand at home and abroad in the ongoing coronavirus pandemic were weighing down businesses and industries and could drive further job losses, they said.

A critical turning point for the economy would come in October when many of Putrajaya’s post-Covid-19 schemes end, said the Malaysian Employers Federation. 

The moratorium on loan repayments is also expected to end by the last week of September and businesses will see then whether they are able to make enough revenue to keep afloat and pay their workers.

“Employers will have to bear the full brunt of the weak demand in the market and stand on their own after all the Prihatin and Penjana schemes end in September,” said MEF executive director Shamsuddin Bardan.

From April to September, employers have recourse to the wage subsidy programme (WSP), which pays them about RM600 per worker earning below RM4,000.

Data from the Employment Insurance Scheme (EIS) shows the programme has helped businesses to keep about 2.7 million workers on the payroll.

“So beginning in October and till November, we will start seeing the full brunt of the job losses as employers start cost cutting measures such as retrenchments.”

“So the government has to consider extending these incentives till the end of the year and announce them early so that employers don’t take drastic action and cut jobs before September.”

Shamsuddin’s comments followed the Statistics Department’s release of May’s labour market figures which showed that the unemployment rate had increased by 0.3% from April to 5.3%, in or 826,100.

However, the rate of job losses from April to May was lower than that from March to April, when the movement control order (MCO) on March 18 shut down most of the economy.

The economy was reopened in phases beginning with the  conditional MCO on May 12 and the recovery MCO in June.

There were 47,300 unemployed from April to May was 47,300 compared to 168,300 from March to April.

The reduction in the jobless rate was likely due to the economic stimulus packages that were introduced during that period and because more sectors were re-opened, said government chief statistician Dr Mohd Uzir Mahidin.

Job losses in May were concentrated in tourism and hospitality, event hosting and organisation, arts and entertainment, and sports and recreation, Uzir said.

“Due to the detection of Covid-19 among foreign labourers, the employment rate in the construction industry also decreased.”

Think-tank Socio-Economic Research Centre (SERC) said 23% of job losses in the year’s first half were in the manufacturing sector.

EIS data showed this was followed by 15% in the hospitality and food industry and 14% in wholesale and retail services.

Professionals, managers, executives and technicians made up 58% of the employment loss while workers earning below RM3,000 a month made up 62%, SERC said.

SERC executive director Lee Heng Guie said the rate of unemployment could stabilise in the third quarter of this year between July to September.

“It’s too early to tell when the turning point will be when the rate of retrenchments will come down, but this is necessary if we are to start the recovery in 2021,” said Lee.

SERC estimated that the unemployment rate for 2020 could be between 5.5-6.5%, or more than a million jobs.

MEF predicted up to two million workers could lose their jobs as demand for goods and services remained sluggish.

“For instance, the government had announced tax exemptions for car purchases but we are not seeing any appetite from consumers for such big ticket items,” said Shamsuddin.

SERC echoed the view, stating: “While the exemptions could spur demand, car buyers won’t return in droves and make this big purchase unless they have secured jobs as well as get a loan.”

This was why it was critical that the government minimised further job losses that would further dampen demand and consumption, triggering a vicious cycle that would hamper recovery. – July 16, 2020.