Home > Business > Economy

Job market will turn around: BOK

Published: 27 Jul. 2018, 20:15

The country’s central bank on Friday predicted that Korea’s grim job market will turn around in the coming months, drawing a stark contrast with private institutions that forecast tougher economic and employment conditions to come.

The Bank of Korea projected that the country’s labor market will improve, led by growth in jobs in the service sector.

“Employment conditions will gradually recover in the second half of this year thanks to the government’s support measures, with the service sector taking the lead,” said the central bank in a statement. “But a slowdown in manufacturing could limit the pace of recovery.”

The Bank of Korea cited overall improvement in the automobile, shipbuilding and service industries as a factor that could drive better jobs reports.

The jobs figure took center stage, as the number of new hires hit an eight-year low in May due to huge losses to the manufacturing and retail sectors.

The central bank’s optimistic projections are at odds with some leading think tanks.

LG Economic Research Institute estimated that Korea’s economy will grow by 2.8 percent this year due to a combination of weak investment, tepid exports and corporate earnings, with the exception of specific areas like semiconductor exports.

“The country’s economy will fare worse into the second half of this year,” said Lee Geun-tae, a researcher at LG Economic Research Institute. “The slump in industrial investment and real estate markets will further accelerate, which will affect the job market.”

The latest data on Korea’s gross domestic product supports this view, as Korea’s GDP grew by 0.7 percent in the second quarter due to diminishing industrial and construction investments.

Construction investment contracted by 1.3 percent while industrial investment tumbled by 6.6 percent.

The LG Economic Research Institute went on to note Korea’s shrinking workforce.

“With the rapidly aging population, the number of economically active people will fall further in 2018 compared to 2017,” the institute said in a report.

The number of people over 15 will increase by 245,000 this year, lower than 2017’s 259,000, according to data from Statistics Korea.

A report from the Hyundai Research Institute also mentioned that the labor market is bound to suffer due to underperforming industries, such as automobiles and construction, and the steep minimum wage hike that could lead shop owners to hire fewer workers.

“As the construction industry will likely face challenges and the number of new recruits in the sector will also decrease, which could increase the number of the unemployed,” the report said. “Corporate restructuring in the automobile segment and an increase to the minimum wage will damage the job market.”

With the government’s decision to raise the minimum wage by more than 10 percent next year, job prospects in the retail sector may be grim.

The Hyundai Research Institute also set its 2018 growth prediction at 2.8 percent.

The Bank of Korea and the Finance Ministry still hold a more positive outlook at 2.9 percent.

BY PARK EUN-JEE [[email protected]]