SEOUL - SOUTH Korea's unemployment rate rose to 3.9 per cent in February - its highest in almost four years - as companies cut back on recruitment amid the economic downturn, data showed on Wednesday.

The February rate, up from 3.6 per cent the previous month, is the highest since March 2005 when it stood at 4.1 per cent, the National Statistical Office said.

The number of people in employment was 22.74 million in February, 142,000 fewer than a year earlier, the office said. It was the largest reduction since September 2003 when 189,000 jobs disappeared.

Younger people were hardest hit, with the unemployment rate among those aged 15-29 rising to 8.7 per cent in February.

'The job market usually remains sluggish in February when more college graduates come out to find work,' Jeong In-Sook, head of the NSO's employment statistics division, told reporters.

'The construction and farming sectors hire fewer workers due to seasonal factors, which also contributed to the hike.' South Korea's job market is cooling fast as companies and households scale back their spending in the face of the global slump.

The economy, Asia's fourth largest, shrank 5.6 per cent quarter-on-quarter in October-December, its steepest fall since the East Asian financial crisis of 1998.

Finance Minister Yoon Jeung-Hyun has said the economy will likely contract two percent this year.

The government has unveiled a series of stimulus measures, and plans next week to announce an extra budget estimated to be worth around 30 trillion won (S$32.1 billion) to create jobs and boost sluggish domestic demand. -- AFP