News Focus) Slowdown in economy expected to cause unemployment surge

By Lee Joon-seung
SEOUL, Nov. 16 (Yonhap) -- The slowdown in the national economy triggered by the
U.S. financial debacle and general decline in worldwide growth is expected to
cause domestic unemployment to rise sharply in the coming months.
Experts at local think tanks said layoffs are inevitable as liquidity shortfalls
rocking South Korea's financial sector begin to spill over into manufacturing and
the service industry.
Large scale layoffs are certain to cast a pall over efforts by the Lee Myung-bak
administration to revive the economy, which is expected to grow in the mid 4
percent range this year but fall under 4 percent in 2009.
The state-run Korea Development Institute (KDI) said the country's GDP may gain
3.3 percent next year, which is the lowest since the 3.1 percent tallied for
2003. Other private think tanks, like the Korea Economic Research Institute,
Samsung Economic Research Institute (SERI) and LG Economic Research Institute are
forecasting sluggish gains of between 3.6-3.8 percent.
A rise in unemployment is a serious concern as it negatively impacts spending and
business investments, which are vital for sustained growth. It could also lead to
a decline in the value of assets, including real estate prices, which could
further trouble financial institutions that have loaned money using real estate
as collateral.
Reflecting such worries, the number of new jobs created in October fell under
100,000 for the first time in 44 months.
The National Statistical Office (NSO) said 97,000 jobs were created in the cited
month, with numbers falling off across the board in manufacturing, construction,
financial and agriculture areas.
Employment numbers began falling under 200,000 in March, but nosedived after
Lehman Brothers filed for bankruptcy in September, causing widespread panic in
the global financial sector.
The NSO added temporary and part-time jobs have been hardest hit by the freeze in
the labor market, while rises in full-time jobs are also losing steam.
The NSO said that although the number of part-time jobs have fluctuated over the
years, the decrease in growth for full-time positions is the first since the
1997-98 Asian financial crisis that crippled the country.
Reflecting such developments, Hwang Soo-kyung at the Korea Labor Institute said
it may be hard to pull off annual employment growth of 200,000 for the whole of
next year.
"If 3 percent growth can be reached, 120,000-130,000 new jobs may be created with
a maximum 70,000-80,000 more being created if the string of economic stimulus
packages announced by the government take hold," she said.
Experts, meanwhile, said that the financial sector will likely be hit the hardest
by the current situation.
Local banks are receiving early retirement applications with numbers doubling
compared to recent years.
Standard Chartered First Bank Korea said 190 employees have applied for early
retirement, 80 more than the year before, while Citibank Korea said 130 have
indicated they want to leave before full scale downsizing takes place. The bank
has not asked for voluntary retirement since 2004.
Other lenders including Kookmin, Shinhan and Woori are all streamlining their
operations and plan to merge bank branches which can entail layoffs.
The country's securities firms and insurance companies are also planning to let
go of employees.
Hana Daetoo Securities Co. said it will receive applications from 150 employees
for early retirement.
In the manufacturing and construction sectors, smaller sized companies have
already started to close their doors, unable to make ends meet amid the weakened
economy and rising loan repayment pressure.
Several small- and medium-sized contractors have filed for bankruptcy, while
rumors have circulated about larger companies coming under pressure as apartment
homes they built are not attracting buyers in the stagnant real estate market.
In manufacturing, GM Daewoo said that it is considering a temporary halt in
production to cope with a drop in demand.
Hyundai and Kia have said they will cut the number of senior executive posts by
around 30 percent and merge divisions.
Busan-based Daewoo Bus Global Corp. said it will cut 237 blue-collar and 80
white-collar workers out of its 970 employees.
Other industries that have been hurt are service-related businesses like travel
agencies and restaurants and the businesses in the public sector.
The Ministry of Knowledge Economy said of the 26 public companies under its
wings, 12 do not plan to hire in 2009.
Commenting on the latest developments, Sohn Min-jung, a research associate at
SERI, said that while full-scale layoffs have not materialized at present, things
could deteriorate in the new year.
He stressed that the laying off of full time employees, in particular, will be
felt the most and could lead to considerable repercussions.
yonngong@yna.co.kr
(END)