Job market forecast to remain robust this year

PETALING JAYA: Malaysia’s labour market is expected to remain resilient in 2026, with the unemployment rate projected to average around 3%, supported by robust domestic demand, continued job creation and investments in electrical and electronics (E&E), data centres and artificial intelligence (AI)-related activities, says MBSB Research.

In its latest economic review, the research house said the unemployment rate eased to 2.9% in August from 3% in the preceding four months, while employment growth remained steady at 1.1% year-on-year (y-o-y).

The outlook remains underpinned by sustained hiring in domestic-oriented sectors, particularly services and construction, although external uncertainties could temper employment growth in trade-related industries.

“The implementation of the 13th Malaysia Plan, National Semiconductor Strategy or NSS and GEAR-uP initiatives should support economic transformation, high-skilled job creation and productivity improvements,” MBSB Research said.

The research house expects sustained investments in E&E, data centres and AI-related activities to create more high-skilled employment opportunities over the medium term, while stable labour market conditions and income growth should continue to support private consumption.

Malaysia’s total employed persons reached a record 16.87 million in August, up from 16.85 million in July, while the number of unemployed persons declined to 512,000 from 520,000.

The labour force participation rate also edged up to a new high of 71% from 70.9% previously, indicating continued engagement in the job market.

However, youth unemployment remained elevated at 10.1% in August, although it improved slightly from 10.2% in July, highlighting persistent challenges for younger workers and fresh graduates seeking stable employment.

Labour demand also strengthened significantly in September, with job vacancies increasing by 170,600 to 539,200 from 368,600 in August, reaching their highest level since July 2022.

MBSB Research said the increase likely reflected a combination of continued MYFutureJOBS advertising requirements for expatriate hiring and sustained demand in domestic-oriented sectors.

The research house noted that job vacancies averaged 161,000 in the first nine months of 2026, suggesting that labour demand remained resilient in the second half of the year, supported primarily by services and construction-related activities.

“Consumer spending is expected to remain supported by resilient labour market conditions, particularly sustained hiring in the services sector through 2026,” it said.

The construction sector is also expected to remain a key growth pillar, supported by ongoing investment activity and the gradual rollout of projects under the 13th Malaysia Plan.

However, the manufacturing sector faces a more challenging environment amid external uncertainties. Malaysia’s S&P Global Manufacturing Purchasing Managers’ Index eased to 49.9 in September from 50.2 in August, marking its first contraction in operating conditions in four months as new orders declined and output moderated.

Despite the softer conditions, manufacturers continued to expand employment for a second consecutive month.