Bloomberg News

South Korea Labor Force Grows as Unemployment Rate Unchanged

May 15, 2012

South Korea added workers last month and the unemployment rate held at two-month low as demand increased for jobs in health, social welfare and education.

The rate was 3.4 percent in April, Statistics Korea said today in Gwacheon, south of Seoul, matching the median estimate in a Bloomberg News survey of 12 economists. The number of employed people increased 1.9 percent to 24.76 million last month from a year earlier.

South Korea’s gross domestic product expanded at the fastest pace in a year last quarter, mostly boosted by government spending and investments by semiconductor chipmakers. Now, the sovereign-debt crisis in Europe threatens to curb the nation’s exports.

“We expect Korea’s GDP growth to be sub-trend this year as a whole, which suggests that the unemployment rate will drift upwards,” Sukhy Ubhi, an economist at Capital Economics Ltd. in London, said before the release. “Renewed concerns over the euro-zone debt crisis suggest that business sentiment may already be turning for the worse.”

The won declined 0.7 percent to 1,161.90 per dollar in Seoul as of 10:51 a.m., according to data compiled by Bloomberg. The benchmark Kospi stock index fell 1.2 percent, which compares with a 1.4 percent decline for the MSCI Asia Pacific Index.

South Korea’s job market is relatively stable in part due to government policies to encourage long-term employment, said Lee Sang Jae, a senior economist at Hyundai Securities Co. in Seoul.

‘Sooner or Later’

“Still, decent jobs with high incomes have not increased enough to spur consumption,” he said. “The escalating European crisis may crimp business sentiment, which should hurt the job market sooner or later.”

The Bank of Korea is likely to keep the key interest rate unchanged this year, setting a record for the longest stretch that the benchmark has stayed on hold, an adviser to the government said last week.

“Inflation pressures will bar a rate cut while the slower economic growth path will prevent them from raising,” said Yun Chang Hyun, who as president of the Korea Institute of Finance advises the central bank, finance ministry and financial regulators. He spoke in a May 11 interview in Seoul.

South Korea held off from altering borrowing costs for an 11th month last week. The longest pause since the central bank began setting a rate in 1999 was the 17-month stretch between February 2009 and July 2010, when the benchmark was at a record low of 2 percent to counter the effects of the global financial crisis.

The seasonally unadjusted jobless rate was at 3.5 percent in April, compared with 3.7 percent in March, today’s report showed.

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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