Economic Update
Local
Malaysia Labour Market - Stable conditions supportive of private consumption
Thu, 11-Sep-2025 07:25 am
by Research Team • Apex Research

  • Labour market remained resilient in July, with the unemployment rate holding at a decade-low of 3.0%, supported by sustained hiring in services and manufacturing sectors.   

  • We caution against external risks that could pressure firms’ profitability, with knock-on effects on wage growth. That said, manufacturing wages and salaries point to sector resilience at this juncture.

  • Stable labour market conditions and the minimum wage policy bode well for consumer spending. We forecast steady real private consumption growth of +5.1% YoY in 2025 to cushion against external headwinds.   

  • We remain cautiously optimistic on the domestic outlook and maintain our 2025 GDP growth projection at +4.2% (2024: +5.1%).   

 

Labour market remains firm in July   

Malaysia’s labour market remained resilient in July despite rising external headwinds. The unemployment rate stayed at a decade-low of 3.0% (Jun: 3.0%), although the number of unemployed edged up to 521.6k (Jun: 518.7k). Meanwhile, active jobseekers went up slightly to 416.2k (Jun: 414.4k).

   

Employment growth held steady at +0.2% MoM (Jun: +0.3%), led by hiring in services sector, particularly wholesale & retail trade, accommodation and F&B as well as information & communication. Manufacturing, construction, agriculture and mining sectors also recorded positive growth. By employment status, the number of employers (+0.6%; Jun: +0.8%), employees (+0.1%; Jun: +0.2%) and the self-employed (+0.4%; Jun: +0.6%) all eased for the month.

 

The labour force expanded further by +0.2% MoM (Jun: +0.3%) to 17.47m (Jun: 17.43m), with the participation rate unchanged at 70.8% in July.

 

Wage growth suggests firms unscathed from external headwinds   

We caution against external risks, particularly impending US tariffs on semiconductors, as a key risk for export-oriented sectors. While employment remains broadly stable, weaker trade prospects could eventually pressure revenues and profitability, with knock-on effects on wage growth. Importantly, manufacturing sector wages and salaries registered healthy growth, rising by +1.6% YoY in June (May: +1.5%). On a seasonally adjusted basis, wages expanded by +1.5% (May: +1.3%), underscoring the sector’s resilience at this juncture despite elevated trade headwinds, and pointing to sustained income support for domestic demand.

 

Steady labour market supportive of consumption       

Stable labour market conditions, coupled with policy measures such as the civil service pay hike and higher minimum wage, should sustain consumer spending momentum. The RM1,700 minimum wage will be extended to all employers starting August, including micro firms with fewer than five workers which were previously exempted, accounting for c.67% of businesses. We forecast real private consumption to grow by +5.1% YoY in 2025 (1H25: +5.2%; 2024: +5.1%). Given consumption accounts for c.61% of GDP, this resilience remains a critical cushion against rising external headwinds.   

 

We remain cautiously optimistic on the domestic outlook, though risks are tilted to the downside. As highlighted previously, a sharper tariff escalation could raise the unemployment rate by up to 0.2ppt, but the labour market’s resilience so far rules out a material deterioration. We maintain our 2025 unemployment rate forecast at 3.0% (7M25: 3.0%; 2024: 3.2%), broadly consistent with full employment. Accordingly, we keep our 2025 GDP growth projection at +4.2% YoY (2024: +5.1%). 

Sentiment: Positive
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