Signs of a recessionJob data in April has been dismal. The number of employed shrank by 476,000 from a year ago, the biggest on-year contraction since February 1999 amid massive layoffs in the aftermath of the Asian financial crisis. Those temporarily removed from payroll against their will reached 1.13 million. When combined, the actual number of paid workers would have contracted by 1.61 million in April. Those remaining idle after giving up looking for jobs jumped to 2.4 million, sending the “economically inactive” tally to a record-high of 16.9 million.
Despite disastrous job data, the economy on the façade looks unshaken. Stock and foreign exchange market remained calm. Roads are brimming with vehicles. Restaurants and cafes in the commercial and business districts in cities were crowded. But the pain will be felt in a full-fledged way once the economy turns to a slump. The gloomy job data may only be the start of the economy’s suffering.
Economic activities have stalled as life has yet to be fully normalized. Mainstay exports have decreased by double digits and the travel and tourism industry has been nearly wiped out. Companies are readying for hard times. They lent out near 30 trillion won ($25 billion) from banks last month.
The government must be thorough in readiness. It pledged to launch a 40 trillion won fund to defend seven key industries. A bill backing the fund passed the National Assembly last month. But the government adjusted the targets for assistance to two categories — airlines and shipping — although it promised to add more industries when the need arises. But that cannot be deemed a proactive move against the worst economic challenge.
The government should be more practical in protecting jobs. It has budgeted an 100 trillion won relief program, but many merchants are turned away by lenders due to their low credit. Zombie businesses should be filtered out to exit, but companies and businesses must not go down due to an outside shock like the epidemic.
Policymakers must accelerate deregulations in new industries as the Covid-19 crisis calls for promotion of so-called “untact economy.” Fiscal spending to subsidize unemployment alone cannot address the job crisis. The government should be speedy and detailed in tackling the job challenges exacerbated by the virus outbreak.
JoongAng Ilbo, May 14, Page 30