Korea’s Jobless Rate Falls to One-Year Low Ahead of Virus Impact
South Korea’s unemployment rate fell in July to the lowest level in a year before a surge in virus infections triggered tighter restrictions nationwide that threaten to damp momentum in the labor market.
The jobless rate declined to 3.3% from 3.7% the prior month, the statistics office said Wednesday. Economists had expected the rate to worsen slightly to 3.8%.
The economy added 542,000 positions in July, compared with the prior year. It was the fifth straight month of gains, although job growth slowed from a monthly average of around 600,000 in the April-to-June period.
The better-than-expected jobs data could give the Bank of Korea some breathing room as it prepares to raise its record-low interest rate as early as this month. Analysts had expected employment to take a hit after the government placed Seoul under semi-lockdown in early July.
Government support including a 34.9 trillion won ($30.2 billion) extra budget passed last month is helping to buffer the impact of the latest outbreaks. The figures also got a boost from fewer people looking for work, with the labor force participation rate slipping to 62.7% in July from 63.0% the previous month.
“Momentum was still alive in the jobs market or people were simply giving up on looking for jobs amid the surge in infections,” said Kim Yoo-bin, an analyst at the Korean Labor Institute in Sejong. “July was still more positive than expected, but job losses could be big in August.”
Kim added that, because job surveys are conducted mid-month, the July figures may not fully reflect deterioration in the labor market that’s likely to have occurred after tighter social-distancing rules were extended beyond the Seoul metropolitan area in the final days of the month.
What Bloomberg Economics Says...
“We doubt the surprise resilience in South Korea’s July job data reflects genuine strength in the labor market. A drop in the labor force participation rate suggests workers are waiting out the latest virus wave, and the bulk of employment gains continued to be driven by public-sector job creation efforts.”
--Justin Jimenez, economist
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Finance Minister Hong Nam-ki, writing in a Facebook post after the jobs report, said the economic effect of the latest virus wave is likely to hit from August, but he said fiscal support would continue to support employment.
On Wednesday, South Korea announced a record number of new cases, surpassing more than 2,000 daily infections for the first time, with a spike in the delta variant. Meanwhile, just 15.7% of the population has been fully vaccinated, leaving the country vulnerable to further virus flareups and extended restrictions.
Korea has so far relied heavily on exports to drive economic growth during the pandemic, but a further fillip from overseas demand may prove difficult if the global picture worsens. This makes it all the more important that the job market holds up and supports household spending.
Last month’s employment gains were led by the health and social service sector, which added 237,000 positions. The sector encompassing public administration, defense and social security also saw increases of 91,000 jobs. Transportation and warehouse businesses gained 121,000 positions.
The retail and wholesale industry lost 186,000 jobs while the restaurant and lodging sector shed 12,000 positions.
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