KUALA LUMPUR (June 15): Malaysia’s labour market felt the brunt of the movement control order (MCO) implementation, with unemployment in April spiking to 5%, the highest since 1990.

Economists said it is likely to go higher in the coming months.

Bank Islam Malaysia Bhd chief economist Dr Afzanizam Abdul Rashid and Sunway University economics professor Dr Yeah Kim Leng, when contacted, both said the rate came in within expectations.

Afzanizam said the unemployment rate should subside in the coming months as the economy gradually reopens, following the implementation of the Conditional MCO from May 4 and the Recovery MCO from June 10.

The statistics department, in a statement today, said the number of unemployed persons went up 48.8% year-on-year (y-o-y) to 778,800 in April.

The labour force grew marginally by 0.6% or 99,100 persons to 15.71 million persons in April 2020, the lowest growth since September 2014.

In tandem with this, the working population decreased by 156,400 persons (-1.0%) y-o-y to 14.93 million persons.

The department said the most affected employed persons were in the manufacturing and services sectors, namely accommodation and food & beverage; arts, entertainment & recreation and other services such as beauty centres and salons.

Yeah said he was expecting the unemployment rate to hover between 5% and 6% during the MCO period due to the shutdown of the economy which caused many businesses to consolidate their workforces.

However, he said as businesses are still beginning to adjust to the economic downturn, the unemployment rate is therefore expected to be worse in the second quarter of the year.

“Although the Recovery MCO allows businesses to operate, the challenge still lies in the hard hit sectors such as aviation, tourism and small and medium enterprises who will continue the consolidation of business. Some will also face liquidation even.

“So we expect to see a further increase in unemployment in the coming months to 6% to 7%. Whether it will stabilise will depend on the economic recovery. Some early indications can be seen in manufacturing production, which returned to pre-MCO levels,” he told theedgemarkets.com

He added that Malaysia’s unemployment rise cannot be compared with advanced economies that are facing the epicentre of the virus such as the U.S. and Europe, which saw a double digit rise in unemployment.