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- Malaysia’s labour force grew to 17.23mn in Q1 2026, while the unemployment rate eased to 2.9% and the LFPR rose to 70.9%.
- Labour demand continued to expand, with total jobs increasing to 9.23mn and the job vacancy rate standing at 2.1%.
- MOHR warned that global economic challenges could increase labour market pressure from Q2 2026 onwards, with manufacturing and wholesale trade among the sectors most at risk.
The Malaysian labour market remained resilient in the first quarter of 2026, supported by steady participation and continued labour demand, according to the Department of Statistics Malaysia (DOSM)'s latest Labour Market Review, First Quarter 2026.
The report consolidates quarterly labour indicators and provides an overview of labour market trends, alongside a special feature titled “Beyond Unemployment: A Structural Analysis of Youth NEET in Malaysia”.
Labour market stays steady despite global uncertainty
Dato’ Sri Dr Mohd Uzir Mahidin, Chief Statistician of Malaysia said the economy continues to demonstrate resilience despite global economic uncertainty, supported by a diversified economic structure and strong domestic demand.
He noted that key sectors, including services, manufacturing, and construction, continued to underpin growth, while external trade performance remained supported by Malaysia’s integration into global supply chains.
According to him, consumer spending also received a boost from major festive periods, including Chinese New Year, Ramadan and Hari Raya Aidilfitri, helping to sustain overall economic resilience.
He added that a stable labour market, characterised by low unemployment and sustained employment growth, has further reinforced Malaysia’s economic resilience.
Labour force expands to 17.23mn, unemployment decreases
In terms of labour market performance, the labour force continued its growth trajectory in Q1 2026, increasing by 0.9% or 145,400 persons to 17.23mn compared to 17.09mn in the same period last year.
The number of unemployed persons declined by 3.1% or 16,000 persons to 506,500, a decrease from 522,500 in Q1 2025.
As a result, the unemployment rate decreased slightly lower to 2.9%, reflecting continued stability in employment conditions.
The Labour Force Participation Rate (LFPR) also increased marginally by 0.1 percentage points to 70.9%, compared to 70.8% in the corresponding quarter last year.
Underemployment trends improve across all indicators
Underemployment indicators showed further improvement, supported by sustained employment growth.
The number of persons working less than 30 hours per week declined by 4.1% year-on-year to 231,600 persons.
Time-related underemployment also fell more sharply by 15.0% to 123,300 persons, with the rate recorded at 0.7%.
Skills-related underemployment, referring to tertiary-educated individuals employed in semi-skilled or low-skilled roles, decreased by 0.9% or 18,200 persons to 1.93mn.
The rate of skills-related underemployment also improved, easing to 35.2% from 35.7% a year earlier.
Labour demand continues to expand
Labour demand in Malaysia continued to grow in Q1 2026, with total jobs rising by 1.8% (162,400) to 9.23mn compared to the same quarter in 2025.
Filled jobs increased by 1.8% to 9.03mn, while job vacancies rose marginally by 0.4% to 194,800.
The job vacancy rate stood at 2.1%, indicating continued, and moderate demand for labour across economic sectors.
Productivity and hours worked improve
Labour productivity, measured by value added per employment, increased by 4.3% to RM26,171 per person compared to Q1 2025.
Total hours worked rose by 0.5% to 9.63bn hours, while value added per hour worked increased by 4.8% to RM45.5 per hour.
"Despite cost pressures from rising global energy prices, various government interventions, including targeted subsidies, price controls, and energy efficiency initiatives, continue to be implemented to mitigate impacts on households and ensure economic and labour market stability remain intact,” he added.
MOHR warns of rising pressure from Q2 onwards, introduce PACE Package
On the back of the latest report, the Ministry of Human Resources (MOHR) said global economic challenges are expected to place increasing pressure on Malaysia’s employment landscape, prompting the need to strengthen a more adaptive and resilient workforce ecosystem.
In response, the Ministry announced the roll-out of the Progressive Acceleration for Capability and Employment (PACE) Economic Resilience Package, which was announced during the 2026 Labour Day celebrations, which is expected to benefit around 86,000 workers and trainees through social protection, skills development, job placement, young talent development, and gig worker support.
MOHR’s analysis, which is based on labour data, employer reporting, and Future Skills Talent Council (FSTC) pulse surveys, indicates rising labour market pressure from the second quarter of 2026, particularly between May and September, identified as a high-risk period. It also noted that January 2026 recorded 10,658 Employment Insurance System (SIP) claims, the highest for a January since the system was introduced.
Without intervention, SIP claims could rise to around 18,500 by August 2026, close to the COVID-19 peak, with manufacturing, wholesale and retail trade, administrative and support services, transport and storage, as well as information and communication identified as the most at-risk sectors.
To address this, MOHR has presented the PACE proposal to the National Economic Action Council (MTEN) as a pre-emptive measure and is coordinating implementation across Social Security Organisation (SOCSO), Human Resources Development Berhad (HRD Corp), Skills Development Fund Corporation (PTPK) and Talent Corporation Malaysia Berhad (TalentCorp).
Key initiatives include SOCSO’s RM580mn allocation to support over 56,000 workers, HRD Corp’s RM100mn upskilling programme for around 20,000 participants, PTPK’s RM20mn gig worker training initiative, and TalentCorp’s RM10mn industrial training matching grant targeting 5,000 placements.
MOHR said it will continue implementing the PACE initiatives while closely monitoring global economic developments, with proactive measures to safeguard job stability, improve workforce employability and protect overall worker well-being.
Overall outlook
Overall, Malaysia’s labour market entered 2026 on a stable footing, supported by higher participation, lower unemployment, and continued job creation.
However, both DOSM and MOHR highlighted growing external risks, with global economic uncertainty expected to place greater pressure on employment conditions in the coming quarters.
ALSO READ: Malaysia's unemployment rate holds steady at 2.9% in March 2026: DOSM
Infographics / DOSM
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