South Korea’s jobless rate climbs as rates weigh on hiring

SOUTH Korean unemployment climbed in December in a sign that rising interest rates and fallout from a tragic crowd crush are weighing on consumption and the broader labour market.

The jobless rate increased to 3.3 per cent from 2.9 per cent in November, the statistics office said on Wednesday (Jan 11). Economists had forecast it to edge up to 3 per cent. The economy still added 509,000 positions in December compared with a year earlier.

The Bank of Korea is 18 months into a tightening cycle designed to curb inflationary pressures and economists predict that a rate rise on Friday may be its final move. Policymakers are increasingly worried about the economic outlook both at home and abroad and today’s data supports that concern.

If in two days’ time the central bank hikes by a quarter-percentage point, as expected, it will take the cumulative increase in borrowing costs since August 2021 to 3 percentage points.

On top of rising loan repayments, a crowd-crush tragedy in October has also weighed on private consumption, which had been a major driver of the economy in addition to a boost following the relaxation of Covid regulations.

The Finance Ministry said last month that the cancellation of gatherings and a period of mourning after the tragedy had likely dented consumer sentiment.

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Today’s report showed restaurant and lodging businesses snapped a period of increased hiring year-on-year in December, while the warehouse and transportation industry saw decreases for a second month.

The construction industry recorded a fall in hiring as the property market cools in response to bigger-than-usual rate hikes and following the default of a Legoland Korea developer in the fall.

Manufacturing added 85,800 jobs compared with the year-earlier period, the smallest increase since February as semiconductor production dwindles and exports sputter. Meanwhile, the agricultural sector saw its first job losses since the spring of 2021. BLOOMBERG