Bank of Korea Releases Monetary and Credit Policy Report
Although the recent increase in the number of employed persons has slowed down, it is assessed that the labor market is not contracting.
In the Monetary and Credit Policy Report released on the 12th, the Bank of Korea evaluated that while the pace of employment growth has recently slowed somewhat rapidly, the unemployment rate remained at a low level, and no significant changes were observed in other labor indicators, indicating that there has been no sharp decline in labor demand.
The report explained that when breaking down the recent slowdown in employment growth into three factors?population, economic activity participation rate, and unemployment rate?the main factor was the deceleration in the rise of the economic activity participation rate.
It further stated that the slowdown in the economic activity participation rate can be interpreted as a slight adjustment in labor supply, which had been increasing rapidly above the trend.
On the other hand, the unemployment rate has remained at a low level in the mid-to-high 2% range since the beginning of this year, showing that the employment market remains tight. The slight increase in the unemployment rate this year compared to last year is mainly attributed to a decrease in the employment rate (reduction in new hires) rather than an increase in the job separation rate (layoffs).
However, the recent slight increase in long-term unemployed persons is pointed out as a potential factor that could raise the unemployment rate in the future.
The report also assessed that the decrease in potential job seekers within the economically inactive population is limiting the rise in the economic activity participation rate.
The recent decline in potential job seekers is due to the labor market’s favorable conditions over the past two years, which reduced the inflow of potential job seekers through job losses, and the fact that a significant portion of existing potential job seekers have successfully found employment. Accordingly, it is expected that the large increase in labor supply seen over the past two years will be difficult to replicate.
An official from the Bank of Korea emphasized, "Despite the recent slowdown in employment growth, there are no clear signs of labor market contraction. However, the significant decrease in potential job seekers within the economically inactive population could act as a constraint on future labor supply growth."
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