Recent official data showed a mere 5,000 new jobs were created in South Korea in July this year, suggesting a sharp decrease from 106,000 a month earlier. This is the smallest number since January 2010, when the country was thrown in the depths of the global financial crisis. The latest job creation rate is also far below the 72,000 reported in May, which the South Korean finance minister said was a “shock”.
The unemployment rate for July was a seasonally adjusted 3.8 percent, up 0.1 percent from June. Meanwhile, youth unemployment remained high at 9.3 percent, unchanged from June. This finding overshadowed President Moon Jae-in’s efforts on creating employment opportunities particularly for young people.
The report finding is projected to undermine Moon’s popularity, who has claimed himself as a “Jobs President.” His iconic income-led growth, which features less working hours and steep hike of minimum wages, is likely to draw fire as well because it affects negatively to the employment rate in the country.
Employment in the mining and industrial sectors was down 133,000 while manufacturing industries cut 127,000 job roles. Wholesale and retail companies, which are mostly small to medium enterprises, shed 80,000 jobs. In a press release, the finance ministry said that business restructuring and meagre car sales had led to continuous job losses, Reuters reports.
Responding on the release of the data, the ministry stated that it plans to employ “all available policy tools” to energise the slow job market.
“First, the government will expand jobs in public sector, since tax revenue has been robust and the government has enough room to spend. Second, the administration is likely to adopt business-friendly policies to facilitate job creation,” said Lee Sang-jae, chief economist at Eugene Investment and Securities.
“However, these policies would be effective only in the short term, simply to prevent further deteriorations.”
Oh Suk-tae, an economist at Societe Generale in Seoul, said the weak job data would make it “impossible” for the Bank of Korea to raise interest rates at its monetary policy committee meeting on August 31.
“From a common-sense standpoint, board members won’t be able to support a rate hike,” Oh said. “In addition to external factors including the Turkish crisis, the job data made the monetary decision clear. Based on the trend, my view is the data predicts negative jobs growth in the near future.”