Higher Business Costs May Slow Hiring in 2H2026

 

Higher material and operating costs could begin to weigh on hiring and slow employment growth in the second half of 2026. Apex Securities (“Apex”) said the delayed impact of elevated business costs could weaken business activity and labour demand, while the recent rise in unemployment and job-loss cases warranted close monitoring. Loss-of-employment cases rose for a second straight month to 8,100 in June from 7,766 in May, while job placements fell to 10,591 from 14,366. 

Apex said businesses had so far managed supply disruptions relatively well, while the pass-through of higher costs to consumer inflation remained manageable. Hong Leong Investment Bank Research similarly said geopolitical tensions and the energy crisis could cap labour demand, although sustained economic growth and supportive government policies should keep the job market resilient.

 

Source: https://en.wikipedia.org 

The caution comes as Malaysia’s unemployment rate remained at 3% in May, unchanged from April. The number of unemployed people rose 0.3% month-on-month to 513,400 from 511,800, although the pace of increase slowed from 0.6% previously. The number of active jobseekers also increased to 408,000 from 407,100. Employment edged up 0.1% month-on-month to 16.82 million, supported by gains across the services, manufacturing, construction, agriculture and mining sectors. 

Within the services sector, wholesale and retail trade, accommodation, food and beverage, and information and communications were among the main contributors to employment growth. 

However, employment declined 0.2% from a year earlier, marking the first year-on-year contraction since February 2021. Job vacancies also fell to 114,500 in May from 122,000 in April, according to Social Security Organisation (Socso) data. Apex nevertheless expects labour market conditions to remain broadly stable, supported by firm domestic demand, investment activity and export-oriented industries, particularly electrical and electronics. It maintained its 2026 unemployment rate forecast at 3%. HLIB also expects the labour market to remain steady despite external headwinds. 

The unemployment rate for those in the 15-24 age bracket has been high at 10.2% or approximately 300,000 youths. This is where the Government must really focus. They are new entrants into the job market. Skill sets may not be in tune with what the market wants. It is best to retrain some in new technologies and new requirements instead of them becoming Grab delivery riders! 

Reference:

Higher business costs may slow hiring in 2H2026, research houses warn, Deepalakshmi Manickam, theedgemalaysia.com, 14 July 2026