South Korea’s unemployment rate jumped to a nine-year high last month as more people shunned low-paying work in the face of rising minimum wages, putting further pressure on the economy and deepening policy frustrations for President Moon Jae-in.
The unemployment rate rose to 4.4 per cent last month in seasonally adjusted terms, the highest since the 4.7 per cent level posted in January 2010, with most of the job losses seen in manufacturing and construction sectors, data from Statistics Korea showed yesterday.
Vanishing jobs are hitting Asia’s fourth-largest economy at a time when the trade dispute between the United States and Chinaits two biggest trading partnersthreatens to hurt the world’s sixth-largest exporter. Exports declined last month as sales to China shrank for a third month in a row, adding to the strains for jobs in South Korea’s manufacturing and services sectors.
“The trade disputes haven’t hit the nation’s manufacturers yet and recent job losses are more related to local restructuring issues and the minimum wage hikes hitting self-employed businesses,” said Lee Sang-jae, an analyst at Eugene Investment and Securities.
“Having said that, manufacturers are likely to hire even fewer workers should this exports downturn continue.” In December, the jobless rate was 3.8 per cent.
A combined hike in the nation’s mandatory minimum wages over only two years has led to a drop in low-paying jobs across retailers, construction and retail sectors in a blow to the economy already grappling with slowing exports.
Effective from last month, the minimum wage increased 10.9 per cent from last year to 8,350 won (S$10) an hour, following a 16 per cent increase made for last year.
Workers at the manufacturing sector were the hardest hit last month, shedding 170,000 jobs from a year earlier. The construction sector and retailers also lost 19,000 jobs and 67,000 jobs respectively.
The spike in the jobless rate adds to economic policy frustrations and political challenges for President Moon, whose approval rating has dropped sharply in recent months.
Shortly after yesterday’s data release, Finance minister Hong Nam-ki said at a policy meeting the government will be making “all-out efforts to achieve its goal to create 150,000 jobs” this year.
Economists say a combination of falling exports, China’s slowdown and a weaker labour market pose further risks for Asia’s fourth-largest economy this year.
The rising risks to growth has prompted the central bank to adopt a more cautious approach to policy. Last month, the Bank of Korea left the policy rate unchanged at 1.75 per cent, while trimming the growth outlook amid a cooling global economy.
Minutes of that meeting released on Tuesday showed a majority of BOK board members see inflation pressures remaining weak, reinforcing market consensus that policymakers would stand pat for some time.
https://www.straitstimes.com/asia/east-asia/s-korea-jobless-rate-jumps-to-9-year-high
