KUALA LUMPUR - Malaysia’s labour market is showing early signs of pressure in 2026, with job losses rising sharply in the first quarter even though wider employment figures remain steady.

A total of 24,100 workers were retrenched between January and March, 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 were highest in January at 10,700 before falling to 7,500 in February and 5,900 in March, suggesting most job cuts happened early in the year as companies adjusted to uncertainty.

Even with the monthly slowdown, the total number is still much higher than the about 16,500 retrenchments recorded in the first quarter of 2025.

The manufacturing sector was the most affected, as it is sensitive to global trade conditions and changes in external demand.

Job cuts also spread to wholesale and retail sectors as well as logistics, showing wider pressure across supply chains.

Analysts at Hong Leong Investment Bank described manufacturing as the ‘weakest link’ in the labour market due to geopolitical tensions and shifting trade patterns affecting export-driven industries.

Most layoffs were concentrated in the Klang Valley, with Selangor accounting for 29.3% and Kuala Lumpur 25.6% of job losses in March.

The high share reflects strong business activity in the region, where corporate restructuring is usually seen first.

Outside the Klang Valley, Penang faces risks from its electronics industry, while Johor is under pressure due to trade links and economic ties with Singapore.

Despite the rise in layoffs, Malaysia’s unemployment rate stayed at 2.9% for four straight months, according to the Department of Statistics Malaysia (DOSM).

Job vacancies also increased to about 107,000 in March, showing continued hiring in sectors such as services and construction.

This shows a mixed labour market, where some sectors are cutting jobs while others continue to expand.

Early data for the second quarter shows more than 4,700 workers were retrenched in the first 16 days of April, according to SOCSO’s Employment Insurance System.

Economy Minister, Akmal Nasrullah Mohd Nasir said the April to June period is crucial in determining whether cost pressures will lead to more job cuts.

“What we are facing now is no longer a short-term shock,” he said, pointing to global supply issues affecting energy, logistics and raw materials.

Higher energy prices are adding pressure, with Brent crude rising to about USD94 per barrel from around USD72 earlier due to tensions in the Middle East.

Malaysia’s economy is still expected to grow, with GDP projected to expand by 5.3% in the first quarter of 2026.

However, inflation has edged up to 1.7% in March, mainly driven by higher transport costs.

While the economy remains stable overall, officials warn that external risks could continue to affect businesses in the coming months.

Analysts say the impact of job losses is uneven, affecting certain sectors and regions more heavily than others.

The current trend shows companies are becoming more cautious, focusing on cost control and reassessing hiring needs amid global uncertainty.