July 2010 Employment Report

After a busy weekend – open houses (if you’re not Malaysian, check this link for what this is all about), shopping and home improvement – I only had the chance to go over the weekend’s news feeds last night. There’s lots in the new about the ETP and some commentary over the minimum wage, which puts me behind in catching up…again. So there will be a slew of quick posts over today and tomorrow.

First up, last week’s employment and unemployment report from DOS. The unemployment rate has dropped to the low end of its year-long range, dipping to about 3.3%:

I suspect this is mainly due to Census 2010, which runs from July to August, though I don’t have the numbers on how many young’uns were employed on this. The effect should last into August, when the Census was completed, so look for this month’s unemployment rate to rise a point or two.

Up to July this year, the Malaysian economy has added more jobs than the whole of last year:

At this point I have to make a retraction – I’ve always been under the impression that Malaysia’s employment and unemployment numbers excluded foreign workers. Apparently they actually do, and make up about 10% of the official labour force numbers, or just over a million workers. Illegals might double that number however. I’ll be careful to note this in future, if it ever comes up.

It’s interesting to juxtapose this against the Economic Transformation Plan numbers, where the ETP projects and business opportunities (BOs) are expected to generate 3.3 million jobs by 2020.

From my perspective, this is an imperative and not a target we can miss. Although the population is going to grow at a dead slow pace of around 1% according to government projections, I’m expecting the population in the working age bracket (15-64) to increase by 2.5% at a bare minimum and 3.0% on the outside. This faster increase is a function of much larger age cohorts entering the workforce relative to those coming before (Malaysia’s age distribution looks like a pyramid, instead of a cylinder as it does in developed countries), as well as a strengthening trend of much higher female labour participation rates. 3.3 million new jobs would be just sufficient to cover this work force increase i.e. without an increase in unemployment.

I’m not so sanguine as to think that meeting this challenge might not be a struggle, unlike meeting the GNI numbers which should be a breeze. I think the key issues would be closing educational mismatches between prospective workers and private sector requirements, meeting effectively structural employment losses (due to changes in employment patterns from the ETP), and managing foreign labour. (Note: putting in a minimum wage will NOT help).

Any misstep in these areas would result in employment losses, and quite frankly I’m expecting the “natural” unemployment rate to rise over the next ten years by at least a point, to 4.5%-5.0%.

Incidentally, I find it ironic that everyone is talking about the investment numbers, which companies would benefit, and how the government is going to fund the ETP, and virtually nobody is talking about the number, type and location of the jobs that are supposed to be created. After all, jobs and incomes is what the ETP is all about after all.

Technical Notes:

July 2010 Principal Statistics of Labour Force Report from the Department of Statistics (pdf link)