One year after crisis, S. Korea's job outlook remains murky

By Park Sang-soo
SEOUL, Sept. 7 (Yonhap) -- A year after the global economy was thrown into chaos,
prospects for a recovery in the South Korean job market still remain murky, many
analysts here say, despite increasing signs the country is rebounding faster than
expected.

As diverse market indicators point upwards there is now growing optimism that the
worst slump in a decade, sparked by the collapse of U.S. investment giant Lehman
Brothers, may be nearing an end.
On the surface, the latest job market figures seem to support those hopes.
Unemployment in South Korea receded to 3.7 percent in July from 3.9 percent the
previous month, the lowest level in six months and the first on-month drop since
October 2008.
But the country still lost 76,000 jobs in July compared with a year earlier -- a
turnaround from annual job growth the month before -- and unemployment is still
well above pre-crisis levels.
"Job market conditions have recovered but not enough to provide complacency,"
said Park Sang-hyun, an economist at HI Investment & Securities. The analyst said
companies are still reluctant to hire new employees amid persistent weak domestic
demand and a lack of confidence about a global economic recovery.
Towards the beginning of the crisis, the South Korean government and the Bank of
Korea, the country's central bank, rushed to shore up the economy by unveiling
aggressive fiscal spending measures. The administration passed a large-scale
extra budget while the bank slashed its key interest rate to a record low level.
Those efforts seem to have paid off. The economy, Asia's fourth-largest, is
recovering at the fastest pace among major developed countries and expanded a
better-than-expected 2.6 percent on-quarter in the second quarter of this year.
In the last quarter of 2008, it logged a quarterly contraction of 5.1 percent.
Financial markets have also been stabilizing in recent months with the return of
foreign investors. The nation's benchmark stock index, the KOSPI, has surged to a
record high for this year and the local currency has gained ground against the
greenback.
But local job market conditions remain stubbornly poor, according to the analysts.
In August last year, just before Lehman folded, South Korea's unemployed totaled
roughly 764,000. The corresponding figure for July this year was 928,000, and the
jobless rate jumped to 3.7 percent from 3.1 percent over that period, data show.
"Unemployment is a lagging indicator and it will be some time before any
improvement in economic activity feeds through to substantially help the jobs
outlook," said Lee Sang-je, an economist at Hyundai Securities.
"There are speculations that job market conditions may improve, and the state-led
job creation scheme has helped a lot," Lee added. "Still, there are fewer jobs in
private sectors such as the service industry."
Some analysts said the jobless rate may rise once a state-led job creation
program ends in November, and that it is uncertain when domestic demand -- a key
growth engine -- will recover.
According to the central bank, private spending increased 3.6 percent on-quarter
in the second quarter. That's an improvement over a 0.4-percent on-quarter gain
and a 4.6-percent on-quarter decline, respectively, in the first quarter of the
year and the fourth quarter of 2008.
"Data indicate private spending is recovering, but it is not strong enough to
help create more jobs," said Lim Hyung-seok, a researcher at the Korea Institute
of Finance. "Job market situations usually improve when the economy is on a
full-fledged recovery course."
The researcher predicted that, during the second half, marginal companies will be
forced to restructure themselves -- putting more people out of work.
The South Korean government expects the country's average jobless rate to range
from 3.6 percent to 3.7 percent for this year, and said in June that between
100,000 and 150,000 jobs may be lost in all of 2009.
Analysts predicted that, at the earliest, things will start to get better next
year if the economy is able to regain its footing.
"It will be difficult for the job market to see an improvement this year," said
Byeon Yang-kyu, a researcher at the Korea Economic Research Institute.
Son Min-jung of the Samsung Economic Research Institute said hope rests with the
private sector. "Private companies should increase job offerings, but domestic
demand is still weak," Son said.
"Although exports may increase, that won't help create much-needed jobs. The key
is domestic demand."
sam@yna.co.kr
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