(Bloomberg) — South Korea’s jobless rate jumped to a 10-year high in May as the coronavirus pandemic continued to take a toll on the country’s trade-dependent economy.
The unemployment rate climbed to 4.5% last month, from 3.8% in April, data from the statistics office showed Wednesday. Economists expected a rise to 4%. The number of jobs fell by 392,000 in May from the prior year.
“The jobs situation is difficult to predict going forward,” South Korean Finance Minister Hong Nam-ki wrote on Facebook following the unemployment report. “Economic contractions in trading partners are leading to falling exports and that is negatively affecting employment in manufacturing.”
South Korea’s businesses are slashing hiring to cut costs as exports continue to fall and consumption remains sluggish. The rise in the unemployment rate comes despite the government relaxing social distancing restrictions in April, allowing freer public gatherings that unleashed some pent-up demand for services.
Wednesday’s report showed the manufacturing sector lost 57,000 jobs in May, with another 371,000 positions shed by firms in retail, wholesale, restaurant and hotel businesses. The economy added 54,000 jobs in agriculture.
A separate report this week from the labor ministry showed payouts for jobless claims topped 1 trillion won ($835 million) last month, the highest on record.
South Korea Unveils $62 Bln Post-Virus Plan to Reshape Economy
The weakness in the labor market adds urgency to President Moon Jae-in’s push to create jobs in technology sectors less vulnerable to a pandemic. The latest extra budget, part of which is earmarked to fund Moon’s “New Deal” project for jobs, is awaiting parliament’s approval.
South Korea’s government has so far pledged more than 270 trillion won in spending to cushion the impact of the virus, while the Bank of Korea has slashed its key rate to a record low of 0.5%. Still, the government expects the economy to barely grow this year, with no increase in employment.
(Adds comment from finance minister in third paragraph)
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