Korea’s unemployment rate a mere 3.2% in September

Quick Comment: Korea's seasonally adjusted unemployment rate stood at 3.2% in September, in line with the consensus forecast of 3.2% and slightly above 3.1% in August. The 10-year low unemployment rate was 3.0%, and thus the September unemployment rate of 3.2% was not far from the 10-year low, marking Korea's resilient labor market despite intensified external uncertainties.

The labor force increased 0.7% YoY in September, while employment increased at a faster pace of 1.1% YoY. In particular, employment in transport/communication/finance/electricity increased fastest, while employment in manufacturing and agriculture showed declines. Before seasonal adjustment, the unemployment rate had remained unchanged at the low level of 3.0% in September. The labor participation rate went down slightly to 61.0% in September from 61.4% in August.

Employment in Services Increased Fast: Employment growth in transport/communication/ finance/electricity was fastest among all industries at 6.1% YoY in September (vs. 6.7% in August), higher than the average growth of 1.1% in September. The detailed breakdown for September is not available yet, but data over the past few months show that employment in information/communication and finance has been growing at a fast pace.

Employment in business/personal services and wholesale/retail sales were also resilient, up 2.5% YoY and 0.8% YoY, respectively. On the other hand, employment in construction declined 2.8% YoY in September (vs. -0.1% in August), implying the continual sluggishness in Korea's property market. Employment in manufacturing declined 1.2% YoY in September (vs. -0.7% in August), the second consecutive month of decline. The lower manufacturing employment indicated that manufacturers were possibly scaling back their hiring plans amid the uncertain external environment.

Still Resilient Labor Market But Decline in Manufacturing Employment A Concern: The low unemployment rate in September implied that Korea’s labor market remains resilient despite the intensified external uncertainties. The service sector has been supporting employment growth in recent months. However, when we look at the manufacturing sector, employment has actually declined for two consecutive months. The decline may be due to the reduced hiring plans among the manufacturers, in our view.

Korea’s capital goods imports showed the first YoY decline in September, as corporates could be scaling down their capex investment plans. The labor market tends to be a lagging indicator for the economy. Hence, as economic growth worsens in the next few quarters due to the deteriorating external environment, the labor market would have to adjust to employers' weaker financial situations, in our view.