South Korean Employment Falls for First Time Since October 2003

By Seyoon Kim

Jan. 14 (Bloomberg) -- The number of South Koreans with jobs fell in December for the first time since October 2003, the latest sign the economy may be sinking into a recession as exports plunge and domestic demand falters.

The number of employed people declined by 12,000 last month from a year earlier, the National Statistical Office said today in Gwacheon. The jobless rate was 3.3 percent, unchanged from November at the highest since July 2007.

Goldman Sachs Group Inc. and Nomura International Ltd. both in the past week reversed forecasts of growth in South Korea this year, predicting the economy will contract for the first time since the Asian financial crisis a decade ago. Vice Finance Minister Kim Dong Soo said today the government is prepared to take further steps to aid an economy that is likely to “hit the bottom” in the first half of 2009.

“The impact of the global slowdown will linger for quite some time and is likely to led to a deterioration in the job market,” said Oh Suk Tae, an economist at Citigroup Inc. in Seoul. “It’ll take more time for stimulus measures to be effective and flow through into the economy.”

South Korea’s weakening labor market is echoed across the region. Australia lost 15,600 positions in November, pushing up the nation’s unemployment rate to the highest in a year. Japan’s jobless rate climbed to 3.9 percent in November from 3.7 percent in the previous month.

Exports from South Korea slumped 17 percent in December, factory production fell by the most on record in November and confidence among manufacturers for January was at the lowest level since the central bank’s sentiment survey began in 1991.

Banks, Automakers

Hana Bank, South Korea’s fourth-biggest lender, said last week it will offer staff early retirement for the first time in five years to reduce costs in a weakening economy. Kookmin Bank, South Korea’s biggest, received requests for early retirement from 400 employees in December.

Ssangyong Motor Co.’s labor union said today it may accept wage cuts and job-sharing after the South Korean carmaker filed for bankruptcy protection. Ssangyong, a unit of China’s largest auto company, has posted four straight quarterly losses as an economic slowdown damped demand for its gas-guzzling sport- utility vehicles.

The Kospi stock index advanced 0.7 percent to 1,175.69 at 2 p.m. in Seoul after falling as much as 1.4 percent earlier today. The won gained for a second day, rising 0.7 percent to 1,344.50 against the dollar.

“South Korea’s economy will hit the bottom in the first half of this year,” Vice Finance Minister Kim said on radio today. “The government will spend most of this year’s budget in the first half to fight against slowing growth and will prepare further policy measures if needed.”

Stimulus Measures

The government has allocated 140 trillion won ($105 billion), or 15 percent of gross domestic product, in tax cuts, extra spending and liquidity injections, according to figures from the finance ministry this month.

The Bank of Korea cut its benchmark interest rate to a record low of 2.5 percent on Jan. 9, marking the fifth reduction since October, the most aggressive easing since it began setting a policy rate in 1999.

The number of people employed in the manufacturing industry fell 2.4 percent in December from a year earlier and jobs at retail outlets, hotels and restaurants dropped 1.1 percent, today’s report showed. The number of people employed in the construction sector declined 2.5 percent from a year ago.

The unadjusted jobless rate rose to 3.3 percent from 3.1 percent in November.

To contact the reporter on this story: Seyoon Kim in Seoul at Skim7@bloomberg.net