SEOUL (BLOOMBERG) – South Korea lost the most jobs in two decades and the unemployment rate hit a 10-year high as the country’s worst coronavirus outbreak yet forced businesses to slash hiring.

The nation shed 628,000 jobs in December compared with the prior year, a tenth straight monthly drop and the most since February 1999. Restaurant and hotels were the hardest hit, but manfacturing also lost more than 100,000 jobs for a second month, signaling that a recovery in tech exports has yet to translate into increased employment.

The jobless rate jumped to 4.6 per cent, the highest since January 2010. Economists had forecast a reading unchanged from November’s 4.1 per cent.

The damage to the jobs market reflects the tightening of social distancing rules after Korea’s daily infection tally surged above 1,000 last month. Curtailed hours for most shops and the shutdown of karaoke parlours and other businesses where the spread of disease is more likely has hurt workers in the service sector, especially during the holiday season.

“No year-end drinking parties and no spending splurge and you have services workers suffering job losses,” said economist An Young-jin at SK Securities. “The tighter social restrictions hurt sectors that would normally see seasonal improvement.”

Restaurant and hotels shed 313,000 jobs, roughly twice November’s losses. Employment in the manufacturing industry was down by 110,000 workers in the month, a slightly smaller decline than in the previous month, but still a worrisome sign given the economy’s dependence on exports and factory work.

“Manufacturing has been under pressure from greater labor costs even before Covid-19 and the virus only adds to the trouble,” said Sung Tae-yoon, an economics professor at Seoul’s Yonsei University. “An exports recovery isn’t necessarily going to translate into more jobs in the tech sector, which has already automated much of its manufacturing.”

Construction continued to see improving employment, adding 23,000 workers.

South Korea’s ongoing recovery in exports has supported the broader economy, but the job market outlook depends on a successful containment of the latest virus wave and a loosening of restrictions. The number of new infections in South Korea have come down to around 500 a day recently.

To aid the economy, the government plans to give cash handouts worth 4.6 trillion won (S$5.56 billion) to millions of South Koreans before next month’s Lunar New Year holiday and front-load fiscal spending in the first half of the year.