This is expected to boost wage growth.
With services expected to become the key growth driver, it is just a matter of time before the labour market reaches a turning point, the Bank of America Merill Lynch (BofAML) said.
According to its forecast, services employ the bulk of workers and its fortunes are closely tied to labour market conditions.
BofAML ASEAN economist Mohamed Faiz Nagutha commented, "Below-trend growth in 2016-17 has led to substantial slack in the labour market, which should unwind in the coming quarters."
The services sector's contribution to GDP dipped from 2.1% in 2015 to 0.7% in 2016, albeit it is still the highest contributor amongst sectors. BofAML expects the figure to hit 1.6% in 2017.
Moreover, BofAML is expecting overall net job losses to turn into modest gains soon.
"Wage growth should be supported by this recovery and robust productivity growth," Nagutha added.
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