South Korea’s Jobless Rate Rises as Tighter Virus Curbs Hit
South Korean employers last month added the most jobs since 2014, signaling that the labor market was continuing to heal even as the government started to introduce new curbs to control the omicron virus variant.
The economy added 773,000 jobs in December compared with last year, a 10th straight monthly improvement, though a jump in people seeking work contributed to an increase in the unemployment rate, according to government data Wednesday.
The participation rate rose to a seasonally adjusted 63.4% from 62.8% in November, a factor that lifted the jobless rate to 3.8%, above the median forecast for a reading of 3.2%.
Economic uncertainty has risen in recent weeks along with the fast spread of omicron, but December’s figures offer a snapshot of a labor market that was showing signs of recovering even as the government added new restrictions.
The jobs report comes just days before the Bank of Korea meets to decide on policy, having raised interest rates twice since the summer.
The strength of the labor market in the face of a worsening virus situation will number among the factors the bank considers, with economists split on whether it will hike rates again at the meeting.
What Bloomberg Economics Says...
“The unexpected -- and quite sharp -- jump in South Korea’s unemployment rate in December masks improvement in the job market. The main driver was a surge in participation -- more people started looking for work again despite tightened social distancing measures and the country’s worst Covid-19 wave yet.”
--Justin Jimenez, economist
To read the full report, click here.
Economist Ha Keon-hyeong at Shinhan Investment Corp. said rising participation suggests increased confidence among workers looking for jobs, a sign of labor market strength that could reassert itself once omicron passes.
“People are seeing less uncertainty in the Korean jobs market,” said Ha Keon-hyeong, an economist at Shinhan Investment Corp. “This could be a relief for the BOK, which has cited inflation as one of its major concerns, as improvement in the labor supply can translate into less inflationary pressure.”
The Korean government tightened virus restrictions twice in December just after easing them the previous month, as Covid infections surged to record levels amid the spread of the variant.
Governor Lee Ju-yeol has said that omicron is the biggest threat to the economy’s recovery.
Still, a majority of economists expect the BOK to raise rates sooner or later this quarter as it seeks to limit the risk of financial imbalances and stem inflationary pressure.
With the BOK moving away from its pandemic stimulus settings, the renewed curbs and concern over the latest infection wave have prompted calls for an extra budget to keep the recovery on track by helping businesses and households.
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