PETALING JAYA: The labour market is expected to remain resilient for the rest of 2026 despite mounting global uncertainties, although hiring momentum is likely to moderate as businesses face rising geopolitical risks and higher energy costs, according to analysts.

Analysts believe the domestic job market remained close to full employment, supported by sustained economic expansion, broad-based labour demand and continued government initiatives to improve workforce quality, even as external headwinds cloud the outlook.

Hong Leong Investment Bank (HLIB) Research said the labour statistics for May suggested that conditions have stabilised after a period of moderation.

“The May print points towards broadly stable labour market conditions,” it said, adding that while labour market strength has softened from the previous year, month-on-month indicators showed that “the overall labour market remains steady”.

The research house expects employment to remain supported by sustained economic activity and government policies despite uncertainties arising from the Middle East conflict and the resulting energy market volatility.

“While geopolitical tensions and the associated energy crisis add a layer of uncertainty that could cap labour demand, we also expect the job market to stay resilient,” HLIB Research said.

It maintained its expectation that Bank Negara Malaysia will keep the overnight policy rate unchanged at 2.75% for the remainder of the year.

TA Research shared a similarly outlook but cautioned that employers could become more conservative if geopolitical tensions persisted.

It said hiring activity has moderated for a third straight month, mainly because of the strong comparison base from last year’s robust employment growth rather than a deterioration in labour demand.

“Looking ahead, the recent escalation of geopolitical tensions has heightened uncertainty over global energy markets,” the research house said.

It warned that prolonged disruptions to energy supply routes and elevated oil and gas prices could raise transportation, logistics and production costs, squeezing business margins.

Should these conditions persist, companies may become more cautious about investment, expansion and hiring, potentially weighing on employment growth in the second half of financial year 2026.

Nevertheless, TA Research expects the unemployment rate to remain around 3% for the rest of the year, describing the labour market as operating near full employment, rather than showing signs of underlying weakness.

Looking further ahead, it said structural reforms would underpin longer-term labour market resilience.