Economic Update
Local
Malaysia Labour Market - Steady conditions supportive of overall growth
Tue, 11-Nov-2025 08:08 am
by Research Team • Apex Research

  • The labour market remained firm in September, with the unemployment rate holding at 3.0%, consistent with full employment.

  • Hiring in the services sector is expected to stay resilient, supported by steady consumer spending and sustained investment flows. We project services GDP to grow around +5.0% YoY in both 2025 and 2026.   

  • The better-than-expected performance in export-oriented manufacturing should provide near-term support to employment, though Malaysia’s October manufacturing PMI signalled uneven hiring momentum within the broader sector.

  • We maintain our 2025 unemployment forecast at 3.0% (2024: 3.2%), which should continue to underpin private consumption. For 2026, we introduce a new unemployment rate forecast of 3.1%, reflecting a slight uptick as tariff effects become more visible.

 

Labour market holds firm in September   

Malaysia’s labour market remained firm in September. The unemployment rate held steady at 3.0% (Aug: 3.0%), as the number of unemployed fell for a second straight month to 518.6k (Aug: 520.0k). Active jobseekers also declined slightly to 413.6k (Aug: 414.9k).

 

Employment growth was unchanged at +0.2% MoM (Aug: +0.2%), driven by sustained hiring in the services sector, particularly wholesale & retail trade, accommodation & F&B as well as information & communication. Employment also increased across manufacturing, construction, mining and agriculture sectors. By employment status, the number of employers rose at a faster pace (+1.3%; Aug: +0.7%), while employees (+0.1%; Aug: +0.2%) and own-account workers (+0.4%; Aug: +0.5%) grew at a slower pace.

 

The labour force expanded by +0.2% MoM to 17.54m (Aug: 17.51m), with the participation rate steady at 70.9%.

 

Domestic demand to anchor hiring momentum     

Heading into 2026, domestic demand should remain the key anchor for Malaysia’s economy. Hiring momentum in services, which accounts for nearly two-thirds of total employment, is expected to stay firm, supported by resilient consumer spending and steady investment flows amid ongoing policy support. We project services GDP to grow around +5.0% YoY in both 2025 and 2026.

 

Meanwhile, the export-oriented manufacturing sector has fared better than expected despite tariff concerns, with nominal exports rising +6.8% YoY in 3Q25 (2Q25: +3.3%). This should provide near-term support to employment. That said, some caution is warranted, as Malaysia’s October manufacturing PMI pointed to a marginal reduction in staffing, suggesting uneven hiring momentum within the broader sector.

 

Unemployment rate to stay low

With the unemployment rate averaging 3.0% in 9M25, we maintain our 2025 forecast at 3.0% (2024: 3.2%), consistent with full employment. The resilient labour market should continue to support private consumption and overall growth, underpinning our unchanged GDP forecast of +4.5% for 2025 (2024: +5.1%). For 2026, GDP growth projection is maintained at +4.1%, while we introduce a new unemployment rate forecast of 3.1% as tariff effects become more apparent.

Sentiment: Positive
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