Recession fears to dent Korean jobs market in 2023

The Korea Times

The Korea Times

Finance

Tue, September 26, 2023 | 08:22

Economy

Recession fears to dent Korean jobs market in 2023

Posted : 2023-01-11 16:55

Updated : 2023-01-11 17:23

Growth in new jobs declines for 7 straight months

By Yi Whan-woo

The jobs market is anticipated to face a severe downturn in 2023 after the growth rate of new jobs slowed down for seven consecutive months in December, according to analysts, Wednesday.

Such a gloomy market outlook comes amidst fears of a recession exacerbated by high inflation, costly borrowing rates and other factors, which all add pressure on employers when deciding whether to hire or not.

The Korean economy this year is estimated to mark a rare 1 percent level of growth, while inflation still remains high ― in the 5 percent range ― and the key interest rate is forecast to go up after it was increased by a combined 2.75 percentage points since August 2021. The rate currently stands at more than a 10-year high of 3.25 percent.

"The number of new jobs is likely to be drastically decreased this year compared to last year's, under the conditions that the Bank of Korea's (BOK) prolonged credit tightening, coupled with a downward trend of the global economy, will adversely affect the country's economy and jobs market here," said Kim Yoo-bin, a director at Korea Labor Institute (KLI).

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The KLI researcher noted the BOK may hike the base rate by 25 basis points to 3.5 percent in its first rate-setting of the year, Friday. Additionally, the planned price hikes in utilities by the government will likely negatively affect inflation from being eased to the 2023 target goal (3 percent range) thereby impacting Korea's economy.

"It is advised that the authorities remain vigilant to counter risks concerning the jobs market," the KLI researcher said.

According to Statistics Korea, Wednesday, the country added 509,000 jobs in December from a year earlier, marking an increase in the number of new jobs for 22 straight months.

The pace of the growth, however, has decelerated for the seventh month in a row. The number of new jobs in 2022 peaked at 935,000 in May and then fell to 841,000 in June, 826,000 in July, 807,000 in August, 707,000 in September, 677,000 in October and 626,000 in November.

The number of new jobs throughout 2022 stood at 816,000 ― the highest in 22 years. But the figure is expected to plunge to 100,000 in 2023, according to the Ministry of Economy and Finance.

The ministry's forecast is on par with the BOK's 90,000 and the state-run think tank Korea Development Institute's 80,000.

In a survey taken by recruiting firm Saramin HR, 45.3 percent of the 378 companies responded that the 2023 economic environment will have a negative impact on their recruitment.

Some 36.7 percent of respondents answered that they will downsize or suspend recruitment this year, while another 36.4 percent said they will try to maintain the scale of their recruitment to be the same as in 2022.

Meanwhile, the overall increase in new jobs for the entirety of 2022 was primarily led by those aged 60 or older.

Those in their 60s or older accounted for 452,000 of the 816,000 new jobs, far higher than the 196,000 for those in their 50s, 112,000 for those in their 20s, 46,000 for those in their 30s and 3,000 for those in their 40s.

The overall growth in 2022 is mainly attributed to the easing of the social distancing measures and a base effect from 2021 when the country was struggling during the pandemic.

yistory@koreatimes.co.kr