Korea's job market has yet to bottom out

Country reports largest job growth in 22 years in January due to low base effect

By Yi Whan-woo

The country's largest job growth reported in nearly 22 years in January will not last long, as it is mainly attributed to a low base effect, which will fade away by March or the end of the first half at the latest, analysts said Wednesday.

They also said the digital technology and other sectors associated with contactless services will have a limited impact on continued job growth momentum.

The skeptical outlook comes after Statistics Korea announced Wednesday that the number of employed people in the country increased by 1.135 million year-on-year to 26.95 million in January.

The increase rate was the highest since March 2000, when the country was recovering from the Asian financial crisis and saw the number of employed people rise by 1.21 million.

Statistics Korea said the record increase in employment is attributable to a base effect, plus change in industrial structure in the pandemic era, noticeably digital transformation and non face-to-face businesses.

On Facebook, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said the job growth of more than one million despite the pandemic “shows the distinctive improvement in quantity and quality” of the job market. His Facebook comment was shared by President Moon Jae-in.

But not everyone agreed with that view.

“We should be careful with being fooled by the base effect, which I would say will fade away by the end of the first half at the latest,” Kim Yong-choon, the head of the Employment Policy Team at the Federation of Korean Industries (FKI), told The Korea Times.

He said the job growth in the corresponding period of January 2021 was “possibly the worst in years” due to the COVID-19 crisis and that makes the year-on-year employment last month look as if it is on a full recovery track.

In January 2021, the number of employed people dropped 982,000 year-on-year to 25.818 million.

Joo Won, a senior economic researcher at Hyundai Research Institute, echoed a similar view, saying, “The base effect accounts for virtually all the job growth of January this year.”

“It will only last through February or March,” he added.

Analysts said the impact of the change in industrial structure on the job market should not be overestimated.

“The contactless service-related sectors are characterized by a smaller market size and smaller number of employees compared to traditional businesses such as manufacturing,” said Lee Geun-tae, a senior research fellow at LG Economic Research Institute. “In other words, their positive influence on employment statistics will be short-lived.”

The FKI analyst acknowledged some pandemic-hit industries that are not categorized as contactless service sectors have the potential to grow as the government is inclined to easing its social distancing campaign. Among the prospective businesses are dining, travel, hospitality, all linked to outdoor activities.

“But even so, it is doubtful whether those businesses can help raise employment sharply,” he said, noting the quality of the related jobs, including salary and regular employment, will matter significantly.

Meanwhile, employment has been on an upward trajectory for 11 straight months since March 2021.

The number of unemployed people decreased 427,000 year-on-year to 1.143 million in January, marking the sharpest fall since August 2000 when the number dropped by 456,000.