Vanishing Jobs Growth Spells Deep Trouble for Korean President
(Bloomberg) -- Unemployment and jobs growth in South Korea haven’t looked so bad since the wake of the global financial crisis, undermining President Moon Jae-in’s economic agenda.
Data released Wednesday show the unemployment rate jumping to 4.2 percent, the highest since early 2010, and much greater than any economists forecast. Jobs growth slumped to just 3,000 last month, also the worst figure in more than eight years.
Moon, who came into office pledging to create jobs and raise incomes for regular workers, has seen his popularity slide amid criticism that he’s hurting employment by aggressively increasing the minimum wage. While pay hikes planned for this year and 2019 are here to stay, Finance Minister Kim Dong-yeon said the government would consider adjusting some policies. He conceded that the jobs market wouldn’t improve much anytime soon.
Moon’s administration points to the fallout from corporate restructuring and the shrinking the working-age population as the source of the problems in the labor market. Businesses counter that hiking the minimum wage 16 percent this year, with another bump of almost 11 percent to come in 2019, has made job layoffs inevitable. Small business owners in particular, from convenience stores to fast-food franchises, have shed workers.
Adding to the economic unease in Korea is the risk that U.S. President Donald Trump may hit car exporters with auto tariffs, even after Seoul agreed to renegotiate its trade deal with the U.S.
South Korean bonds climbed and the won fell after jobs figures, which appeared to squash any near-term prospect of the central bank raising interest rates.
The finance minister said economic policies that are geared toward wage-based growth are moving in the “right direction.” Yet the government also acknowledged the need for more communication and market analysis in order to gain trust from companies and the people, he said.
The presidential office described the recent increase in unemployment as inevitable pain that accompanies a change in the structure of the economy, Yonhap News reported.
Like many other countries, Korea is experiencing a widening gap between the rich and the poor. It’s confounding policy makers and exacerbating political divisions.
--With assistance from Shinhye Kang and Seyoon Kim.
To contact the reporters on this story: Jungah Lee in Seoul at firstname.lastname@example.org;Myungshin Cho in Seoul at email@example.com;Hooyeon Kim in Seoul at firstname.lastname@example.org
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