(Bloomberg) -- South Korea’s unemployment rate fell to a record low last month in a sign of ongoing strength in the labor market, helping to temper any conviction for an imminent policy pivot by the central bank.
The jobless rate slid to 2.4% from 2.5% in July, the statistics office said Wednesday, the lowest level in data going back to 1999 and contrasting with an expectation by economists that it would edge up to 2.6%. The economy added 123,000 positions from a year earlier.
The number reaffirms favorable job-market conditions that have lasted since pandemic-era stimulus percolated through the economy, even as the Bank of Korea raised interest rates. An export rally that began last year has also helped support the domestic economy, allowing companies to largely maintain their payrolls.
What Bloomberg Economics Says...
“The surprise drop in South Korea’s unemployment rate to its lowest on record highlights a tightening labor market and is an encouraging sign that domestic demand could get a boost. Even so, it’s unlikely to dispel concerns at the Bank of Korea that the economy still needs more stimulus.”
-Hyosung Kwon, economist
For full report, click here
Still, the latest figures are unlikely to factor heavily in policy decisions by the BOK in 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 labor 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.
©2024 Bloomberg L.P.
