“Scarring effect” emerging in the job market

MALAYSIA’S gross domestic growth (GDP) is projected to range between -2% to 0.5% in 2020 – a plunge from 4.3% in 2019 due to the COVID-19 pandemic.

Businesses have been forced to shut down during the pandemic and especially during the movement control order (MCO) and more businesses are expected cease operations moving forward.

Thus, a reduction of demand for manpower has led to more people getting retrenched.

According to a finding published by the Social Security Organisation’s (Socso) Employment Insurance System (EIS) entitled Employment Outlook for the First Quarter of 2020: The Impact of COVID-19 on Loss of Employment (LOE), job losses increased by 42% year-on-year (yoy) in 1Q 2020 due to COVID-19.

EIS is a financial scheme aimed at helping employees who lost their jobs until they find new employment. From January to July 2020, a total of 67,068 employees had filled up the EIS forms.

In addition, job losses are anticipated to increase by 50% to 200% yoy for each subsequent quarter in 2020.

Socso also highlighted that the unemployment rate is forecast to hit 4% in 2020, compared to 3.2% during the 1997 Asian financial crisis and 3.7% during the 2008 Global Financial Crisis.

Meanwhile, tourism-related industries (eg accommodation; food & beverages [F&B]; wholesale & retail; transport; and arts, entertainment & recreation) contributed to 43.2% of retrenched workers, followed by manufacturing at 21.8%.

Young workers (those between 15 and 29 years old) account for almost one-third of total retrenchments at 31.8%, while those in the prime working age of 25 to 54 years old make up for 82.6% of total retrenchments.

“Unemployment rate edged up for the second month to 4.8% in November 2020 (October 2020: 4.7%). Year-to-date, jobless rate averaged 4.5% compared to 3.3% in 2019: 3.3%,” Maybank IB Research said in a recent report.

“Additionally, unemployment rate rose 48.7% yoy in November 2020 on the back of a decline in employment of -0.8% yoy.”

Also, the Department of Statistics (DOS) noted there were cancellations or freezing of new hires, especially among small businesses, causing job vacancies to drop to 68,555 in November 2020 (October 2020: 98,568) while the number of job seekers jumped to 185,236 during that period (October 2020: 57,733).

“Amid ‘sticky’ jobless rate, persistent fall in manufacturing jobs and incomes, re-imposition of MCO/CMCO (Jan 13 to Jan 26) and emergency declaration (until Aug 1) to flatten the severe current third wave of COVID-19 infections, we maintain our 4.5% unemployment rate forecast for 2021 (2020E: 4.5%) as we heightened risk of “scarring effect” in job market,” predicts the research house. – Jan 14, 2021

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