Malaysia’s labour market is showing early signs of strain in 2026, with retrenchments rising sharply in the first quarter even as broader employment indicators remain stable.
A total of 24,100 workers were laid off between January and March, marking a 47% increase compared to the same period last year, according to data from the Social Security Organisation (SOCSO) analysed by Hong Leong Investment Bank.
Layoffs peaked at 10,700 in January before easing to 7,500 in February and 5,900 in March, suggesting that much of the workforce adjustment took place at the start of the year as companies recalibrated operations amid rising uncertainty.
Despite the moderation in monthly figures, the cumulative total remains significantly higher than the roughly 16,500 retrenchments recorded in the first quarter of 2025.
Manufacturing emerges as the weakest link
The manufacturing sector has been the hardest hit, reflecting its exposure to global trade cycles and external demand fluctuations. Job cuts have also spread to wholesale and retail, as well as logistics-related industries, underscoring broader ripple effects across supply chains.
Analysts at Hong Leong Investment Bank described manufacturing as the “weakest link” in the current labour market, particularly as geopolitical tensions and shifting trade dynamics weigh on export-driven sectors.
Layoffs cluster in Klang Valley
Geographically, retrenchments remain concentrated in Malaysia’s economic core. In March alone, Selangor accounted for 29.3% of total layoffs, while Kuala Lumpur contributed 25.6%, meaning the Klang Valley region represented more than half of all job losses.
The concentration reflects the region’s dense business activity, where restructuring trends typically surface first. Outside the Klang Valley, risks persist in Penang due to its reliance on the electrical and electronics sector, while Johor faces pressure linked to trade flows and its economic ties with Singapore.
Labour market holds steady
Despite the spike in layoffs, headline indicators suggest resilience. Malaysia’s unemployment rate has held steady at 2.9% for four consecutive months, according to the Department of Statistics Malaysia (DOSM).
Job vacancies have also risen to around 107,000 as of March, signalling continued hiring in sectors such as services and construction.
This divergence points to a bifurcated labour market, where some industries are downsizing while others continue to expand.
April layoffs signal ongoing pressure
Early data for the second quarter indicates that retrenchments are continuing. More than 4,700 workers lost their jobs in the first 16 days of April alone, based on figures from SOCSO’s Employment Insurance System.
Malaysia’s Economy Minister, Akmal Nasrullah Mohd Nasir, has flagged the April–June period as “crucial” in determining whether mounting cost pressures will translate into further workforce reductions.
“What we are facing now is no longer a short-term shock,” he said, pointing to a broader global supply crisis affecting energy, logistics, and raw materials.
Rising energy costs are a key concern. Brent crude prices have climbed to around $94 per barrel, up sharply from about $72 prior to escalating tensions in the Middle East, adding to operational expenses for businesses.
Growth holds, but risks linger
Malaysia’s economy is still projected to grow, with GDP expected to expand by 5.3% in the first quarter of 2026. Inflation, however, has begun to edge higher, reaching 1.7% in March, driven largely by transport costs.
While these figures suggest underlying resilience, policymakers warn that external pressures have not subsided and could continue to test businesses in the months ahead.
On paper, Malaysia’s labour market remains stable. In reality, the impact of layoffs is uneven, hitting specific sectors and regions more intensely.
As one regional financial expert noted, stability at the macro level can mask individual disruption: job losses are “not everywhere, and not all at once,” but deeply felt by those affected.
The current environment underscores a shift from expansion to adjustment, where companies are becoming more cautious on hiring, focusing on cost control, and reassessing workforce needs amid an increasingly uncertain global backdrop.