South Korea’s Jobless Rate Drops as More Leave Workforce

(Bloomberg) -- South Korea’s unemployment rate unexpectedly fell in August, as people dropped out of the labor market at a faster pace while the government prepares another extra budget to fight a resurgence of the coronavirus.

The jobless rate fell to 3.2% in August from 4.2% in the previous month, data from the statistical office showed Wednesday. Economists forecast unemployment holding at 4.2%. However, the nation shed 274,000 jobs from a year earlier -- a sixth straight month of declining employment.

The number of unemployed people not seeking a job rose by 534,000, explaining the drop in the jobless rate. Finance Minister Hong Nam-ki warned September data will better reflect the full impact of harsher social distancing rules and probably see employment further deteriorate. The survey was taken in mid-August just as virus cases started to jump to triple-digit figures.

“I feel heavy-hearted about the extra shock at a time when jobs conditions are already tough,” Hong said on Facebook following the jobs data, pointing to tighter social distancing rules that would impact groups such as the self-employed and temporary workers.

The government will submit a fourth extra budget to parliament this week to provide support for people that have lost income and businesses that have been shut down, according to Hong.

“Those people who’ve simply quit looking for a job should potentially be seen as part of the unemployment picture,” said Sung Tae-yoon, an economics professor at Seoul’s Yonsei University. “The fourth budget will help tide small businesses over, but won’t be nearly enough to resuscitate the economy.”

South Korea’s virus resurgence prompted the central bank to cut its growth forecast and it now expects employment to fall over the year.

​The sector combining retailers, wholesalers, restaurants and hotels led the job losses in August, with 345,000 positions shed from a year earlier. Manufacturing lost 50,000 jobs.

Government stimulus efforts helped to add 107,000 jobs in the category that groups public sector employment together with some service businesses.

People either employed or looking for a job fell by 267,000, the largest drop since April.

The fact that South Korea’s unemployment rate doesn’t factor in people on temporary layoffs tends to distort the picture, said economist Joseph Han at the Korea Development Institute.

“The shock in service sectors may spread to other industries as the coronavirus surges again,” he said.

©2020 Bloomberg L.P.