South Korea’s jobless rate dips to record low as central bank mulls rate cut
SOUTH Korea’s unemployment rate fell to a record low last month in a sign of ongoing strength in the labour market, helping to temper any conviction for an imminent policy pivot by the central bank.
The jobless rate slid to 2.4 per cent from 2.5 per cent in July, the statistics office said on Wednesday (Sep 11), the lowest level in data going back to 1999 and contrasting with an expectation by economists that it would edge up to 2.6 per cent. The economy added 123,000 positions from a year earlier.
The number reaffirms favourable job-market conditions that have lasted since pandemic-era stimulus percolated through the economy, even as the Bank of Korea (BOK) raised interest rates. An export rally that began last year has also helped support the domestic economy, allowing companies to largely maintain their payrolls.
Still, the latest figures are unlikely to factor heavily in policy decisions by the BOK in the coming months as the monetary authorities shift most of their focus to financial imbalances associated with home prices and household loans. Many economists expect the central bank to cut its key rate as soon as it sees signs that the property market is cooling, particularly in Seoul.
“The low joblessness makes it more difficult to predict the timing and extent of a policy easing by the BOK,” said An Young-jin, an economist at SK Securities. “But what the BOK looks hard at is financial stability, and it’s now largely a matter of October or November for a rate cut.”
A deeper look at the latest job report shows manufacturing has performed less than service-related sectors in creating jobs over the years. The sector serves as a core engine of the nation’s export-driven economy and pays better in general than service industries, which have been on the rise in job creation over the years, underscoring a long-term restructuring of the labour market.
That means the ties between job creation and domestic economic momentum may have weakened over the years. In a statement following the data, the Finance Ministry said it will continue to strengthen support for job creation around construction industries and self-employed workers while seeking to boost domestic consumption.
The record-low jobless rate still offers the BOK another piece of proof to further delay its decision to cut the rate if it needs to. The BOK has two rate-decision meetings before the end of the year, and last month Governor Rhee Chang-yong declined to provide a hint on whether a rate cut could come in October or November. BLOOMBERG
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