By Lee Hyo-sik
Staff Reporter
The Korean economy is not creating as many jobs as it used to as high inflation and sluggish private consumption are discouraging businesses from hiring new workers, the Korea Development Institute (KDI) said Wednesday.
It said the world's 13th largest economy is suffering from rapidly slowing domestic demand as a result of surging consumer prices, which has reduced the number of newly created jobs.
``Slowing industrial output growth, rising inventories and other downbeat economic indices show that the economy has entered a downturn. In particular, stagnant domestic spending in the wake of soaring international oil and other commodity prices has hit businesses hard, making them reluctant to invest and employ new workers,'' the institute said.
In June, industrial output grew at a slow rate of 6.7 percent on worsening domestic consumption and corporate investment from a year earlier, down from an 8.6 percent gain the previous month, according to the National Statistical Office (NSO).
Private consumption rose only 2.4 percent in the second quarter from a year ago and seasonally adjusted spending dropped 0.1 percent from the previous quarter.
In July, consumer prices grew at their fastest pace in nearly 10 years, putting a heavier financial burden on businesses and households. Inflation rose 5.9 percent last month from a year earlier, up from a 5.5 percent gain the previous month.
In response to falling domestic demand and other unfavorable economic conditions, companies recently have either downsized their workforce or reduced the number of job offerings.
The number of employed totaled 24 million in June, up 147,000 from a year earlier, down from a 181,000 increase a month earlier, falling short of the government's minimum target of 200,000 new jobs. It was the lowest level since February 2005 when businesses added only 80,000 to their payrolls.
``Corporations will continue to refrain from hiring new workers if domestic spending remains sluggish. But if international crude oil prices continue to head downward and the won gains some ground against the dollar in the second half, consumer price growth will be moderate, which could boost private consumption and thus prompt businesses to hire more employees,'' the institute said.