SEOUL (BLOOMBERG) – South Korean unemployment unexpectedly dropped to a record low last month as restrictions to combat the nation’s worst Covid-19 outbreak prevented job seekers from searching for work.
The jobless rate tumbled to 2.8 per cent from 3.3 per cent in July as the economic participation rate declined, the statistics office said on Wednesday (Sept 15). Economists had expected an increase to 3.5 per cent. Still, the economy added 518,000 positions from a year earlier, a sixth straight month of gains.
Government officials had expected the labour market to deteriorate last month, reflecting a virus wave that put Seoul under a semi-lockdown in mid-July. With the jobless rate coming in below market consensus for a second month, the reasons behind the low readings will be scrutinised by the Bank of Korea (BOK) as it mulls the timing of a second interest-rate hike.
Of key interest in today’s data was the economic participation rate, which declined to 62.8 per cent, the lowest since March.
The report also showed retail and wholesale industries took a beating, shedding 113,000 roles. Manufacturing lost 76,000 jobs. Employment increased by 243,000 in healthcare and social welfare, which are largely impacted by government programmes.
South Korea’s economy has largely held up during the latest outbreak, with exports and investment powering ahead and the damage to consumption smaller than expected. That allowed the BOK to proceed with a rate hike last month, with strong signals that policy normalisation will continue to counter risks from financial imbalances.
The job market may receive support from emergency handouts to most households. The government is hoping the extra cash will be funnelled to small mom-and-pop stores hit by Covid-19 restrictions.
The fully vaccinated share of the population has also reached 40 per cent, allowing a targeted easing of virus restrictions that should support the services industry.