[2023 Employment Outlook] Next Year's Employment Freeze Approaches... Direct Hit from 'Economic Slowdown'

Next year, the job market is expected to face a cold wind. This year showed a relatively favorable employment trend as consumption revived following the lifting of COVID-19 social distancing measures, but with a full-scale economic slowdown anticipated next year, the number of employed persons is expected to decrease significantly. The worsening aging population and declining labor force are also likely to impact the reduction in employment numbers.

According to the Bank of Korea and the Korea Development Institute (KDI) on the 16th, the increase in the number of employed persons next year, when the reopening effect after COVID-19 disappears, is predicted to be only 80,000 to 90,000. Compared to this year's increase of 820,000 based on the Bank of Korea's forecast, this is only about one-tenth. The main reason is the disappearance of the reopening effect, which accounted for about half of this year's employment increase.

KDI also recently projected in its 'Evaluation and Outlook on Employment Growth' report that the number of employed persons will sharply decline from 791,000 this year to 84,000 next year. During the period when social distancing and business hour restrictions forced closures of restaurants and lodging businesses, jobs increased significantly compared to the past as these businesses resumed operations, but next year this will act as a base effect.

If the current consumption growth continues until the first half of next year, face-to-face service industries may continue to recover employment, but manufacturing and non-face-to-face service sectors are likely to stagnate due to the economic slowdown. Next year, the dominant outlook is that not only South Korea but the global economy will contract due to economic recession caused by interest rate hikes, high energy prices, escalating geopolitical tensions such as the Ukraine crisis, and financial market instability.

South Korea's export value has already shrunk from $61.7 billion in May to $52.594 billion in October. Since manufacturing employment accounts for about 16% of total employment, the export and manufacturing downturn is negative for the job market. Looking at employment trends released by Statistics Korea, the increase in employed persons dropped from 935,000 in May to 626,000 in November. Notably, youth employment decreased by 5,000 last month, marking the first decline in 21 months since February last year.

Uncertainties such as interest rates, inflation, and the won-dollar exchange rate also pose negative factors for next year's job market. The U.S. Federal Reserve (Fed) is expected to maintain its interest rate hike stance at least until the first half of next year. Although domestic inflation has recently slightly eased, it is expected to maintain a high rise in the 5% range for the time being. A Bank of Korea official explained, "Due to the economic slowdown, the increase in employment, especially in non-face-to-face service sectors, is expected to shrink," adding, "The number of manufacturing employees will see a reduced increase due to the slowdown in export growth."

There is also an analysis that the lower employment growth compared to previous years will become the 'new normal.' Previously, if the economy was not significantly bad, the number of employed persons increased by 200,000 to 300,000 annually, but now, due to aging and the rapid decline in the core labor population (ages 30?59), natural employment growth from population increase has become difficult.

Kim Ji-yeon, head of the KDI Economic Outlook Office, said, "In the past, 200,000 was the benchmark: if employment conditions were good, the number of employed persons exceeded that, and if bad, it was less. But going forward, due to demographic changes, that benchmark will shift to negative," adding, "Even if employment conditions do not change significantly, the number of employed persons will either not increase or slightly decrease."