Post-lockdown unemployment rate could hit 6.5%, says think tank

Some 54,000 people lost their jobs in the first quarter of this year, largely due to the Covid-19 lockdown.

PETALING JAYA: Unemployment rate could hit 6.5% by the end of the second quarter, a think tank has warned.

In its quarterly economy tracker briefing, Socio-Economic Research Centre quoted figures from the government work insurance scheme Socso, saying 53,952 lost their jobs between January and July 4 this year, exceeding the figure for the whole of last year.

This figure only covers contributors to Socso’s Employment Insurance System and does not take into account some 2.7 million who are self-employed.

But SERC said with signs that the economy was slowly recovering, the unemployment rate could stabilise.

“That’s why I believe the unemployment rate will likely peak going to the third quarter,” said SERC executive director Lee Heng Guie.

The second quarter figures have not yet been published.

“The forecast is between 5.5% and 6.5%. We hope it will settle at 5.5%,” adding that the unemployment rate in normal times is 3.1%. The current unemployment rate in the first quarter is 5%.

He noted the government’s labour market initiatives including the Wage Subsidy Programme and Employment Retention Programme (ERP) have managed to save some 2.7 million jobs.

But he said with nearly 200,000 people applying for the ERP, it could signal more job losses.

Lee said there is a need to stabilise the unemployment rate to ensure consumer spending continues.

“Overall, SERC expects private consumption to slow to 1.5% in 2020. When Malaysians feel safer from the virus and have more secure incomes, they will start to spend,” he added.

He said people were now more confident to resume lives, adding that it could spur consumer spending in the second half of the year.

“Shopping at retailers is a key indicator to watch whether footfalls at key shopping malls have improved.”

Footfalls refer to the number of people entering a shopping area.

Currently, he said, footfalls in major shopping malls range from 50% to 70%, while sales are up to around 40%.

About 10% of retail outlets in some mid-tier malls have closed down.

Lee also said political stability and policy consistency were crucial to draw foreign and domestic investors.

“To investors what is most important is policy continuity and meaningful reforms so that investors have the confidence on where we are heading.

“We must avoid policy flip flops.”

He also said there must be an emphasis on foreign direct investments (FDI) and domestic direct investments (DDI), and for this to happen, clarity in policy direction was important.

“It is good that the National Economic Recovery Plan (Penjana) rolled out impactful measures to encourage FDI and DDI, especially small and medium enterprises (SMEs).”

For the coming budget, Lee said he hoped the government would consider incentives such as lowering corporate tax from 24% to 22%, and 17% to 15% for SMEs, as well as upgrading incentives and allowances for investments.

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