South Korea’s unemployment rate jumped to a nine-year high in January as more people shunned low-paying work in the face of rising minimum wages, putting further pressure on the economy and deepening policy frustrations for President Moon Jae-in.
The unemployment rate rose to 4.4 percent in January in seasonally adjusted terms, the highest since the 4.7 percent level posted in January 2010, with most of the job losses seen in manufacturing and construction sectors, data from Statistics Korea showed on Wednesday.
Vanishing jobs is hitting Asia’s fourth largest economy at a time when the trade dispute between the United States and China — its two biggest trading partners — threatens to hurt the world’s sixth-largest exporter.
Exports declined in January as sales to China shrank for a third month in a row, adding to the strains for South Korea’s manufacturing and services sector jobs.
“The trade disputes hasn’t hit the nation’s manufacturers yet and recent job losses are more related to local restructuring issues and the minimum wage hikes hitting self-employed businesses,” said Lee Sang-jae, an analyst at Eugene Investment & Securities.
“Having said that, manufacturers are likely to hire even fewer workers should this exports downturn continue.”
In December, the jobless rate was 3.8 percent.
A combined 29 percent hike in the nation’s mandatory minimum wages over only two years have led to a drop in low-paying jobs across retailers, construction and retail sectors in a blow to the economy already grappling with slowing exports.
Effective from January, the minimum wage increased 10.9 percent from last year to 8,350 won ($7.46) an hour, following a 16 percent increase made for 2018.
Workers at the manufacturing sector were the hardest hit in January, shedding 170,000 jobs from a year earlier. Construction sector and retailers also lost 19,000 jobs and 67,000 jobs, respectively.
The spike in the jobless rate adds to economic policy frustrations and political challenges for President Moon whose approval rating has dropped sharply in recent months.
Shortly after the Wednesday data release, finance minister Hong Nam-ki said at a policy meeting the government will be making “all-out efforts to achieve its goal to create 150,000 jobs” this year.
Economists say a combination of falling exports, China’s slowdown and a weaker labor market pose further risks for Asia’s fourth-largest economy this year.
The rising risks to growth has prompted the central bank to adopt a more cautious approach to policy. Last month, the Bank of Korea left the policy rate unchanged at 1.75 percent, while trimming the growth outlook amid a cooling global economy.
Minutes of that meeting released on Tuesday showed a majority of BOK board members see inflation pressures remaining weak, reinforcing market consensus that policymakers would stand pat for some time.