South Korean unemployment climbed in December in a sign that rising interest rates and fallout from a tragic crowd-crush are weighing on consumption and the broader labor market.
The jobless rate increased to 3.3% from 2.9% in November, the statistics office said Wednesday. Economists had forecast it to edge up to 3%. The economy still added 509,000 positions in December compared with a year earlier.
For the year of 2022, the unemployment rate reached 2.9%, lower than 3.7% a year earlier, the statistics office said.
The Bank of Korea is 18 months into a tightening cycle designed to curb inflationary pressures and economists predict that a rate rise on Friday may be its final move. Policy makers are increasingly worried about the economic outlook both at home and abroad and today’s data supports that concern.
If in two days’ time the central bank hikes by a quarter-percentage point, as expected, it will take the cumulative increase in borrowing costs since August 2021 to 3 percentage points.
On top of rising loan repayments, a crowd-crush tragedy in October has also weighed on private consumption, which had been a major driver of the economy in addition to a boost following the relaxation of Covid regulations.
The Finance Ministry said last month that the cancellation of gatherings and a period of mourning after the tragedy had likely dented consumer sentiment. In a separate statement on Wednesday, the ministry said this year’s jobless rate is likely to edge up while job gains largely weaken.
The report showed restaurant and lodging businesses snapped a period of accelerating year-on-year increases in hiring in December, while the warehouse and transportation industry saw decreases for a second month.
The construction industry recorded a fall in hiring as the property market cools in response to bigger-than-usual rate hikes and following the default of a Legoland Korea developer in the fall.
Manufacturing added 85,800 jobs compared with the year-earlier period, the smallest increase since February as semiconductor production dwindles and exports sputter. Meanwhile, the agricultural sector saw its first job losses since the spring of 2021.