SEOUL • South Korea posted the weakest job growth in nearly nine years in July, adding to pressure on President Moon Jae-in to do more to boost economic growth and abandon policies focused on raising wages and improving income distribution.
Bond futures prices rose as the poor job growth data further dampened expectations among investors that the Bank of Korea would raise policy interest rates at its Aug 31 meeting.
"Today's poor job data makes it look almost impossible for the Bank of Korea to raise interest rates this month," said Mr Han Song-jo, head of the fixed-income investment division at Hyundai Investments, an asset management company.
Statistics Korea data out yesterday showed the economy added a mere 5,000 jobs in July over that a year earlier, the smallest annual gain since 10,000 jobs were lost in January 2010 in the depths of the global financial crisis.
Following the release of the data, the Finance Ministry said it would employ "all available policy tools" to energise the slow job market.
The data comes as an additional setback for self-styled "Jobs President" Moon's approval rating, which has fallen for three straight weeks to reach 55.6 per cent, hovering around its lowest since he took office about a year ago.
Yesterday's figures are expected to further undermine the popularity of Mr Moon, whose policy of income-led growth - which features fewer working hours and a steep hike in minimum wages - is expected to draw fire as well. July's unemployment rate was a seasonally adjusted 3.8 per cent, up 0.3 percentage point from a year earlier. The average job growth for the first seven months of this year plunged to 122,000 from 353,000 for the same period last year.
Employment in the mining and industrial sectors was down 133,000 and manufacturing industries cut 127,000 jobs. Wholesale and retail businesses, which are mostly small to medium-sized enterprises, shed 80,000 jobs.
The Finance Ministry said that business restructuring and weak car sales had also led to job losses. The government is due to unveil details about fresh job creation plans when it submits next year's Budget Bill to Parliament next month.
"First, the government will expand jobs in the public sector, since tax revenue has been robust and the government has enough room to spend. Second, the administration is likely to adopt business-friendly policies to facilitate job creation," said Mr Lee Sang-jae, chief economist at Eugene Investment and Securities. "However, these policies would be effective only in the short term, simply to prevent further deterioration."
Last month, the government cut its job growth target sharply to 180,000 for the whole of this year from the 320,000 set earlier, but even this downgraded target now looks difficult to achieve.