South Korea’s government dramatically cut its outlook on the job market while slightly lowering its growth forecast Wednesday, boding ill for President Moon Jae-in’s jobs-first agenda.
The Finance Ministry said South Korea’s economy will create a mere 180,000 jobs this year, down from the 320,000 jobs it forecast in December and the lowest annual increase in years.
“Growth could slow and poor employment or income distribution are unlikely to improve in the short term,” Finance Minister Kim Dong-yeon said in a briefing.
“The economic situation could become even more difficult, if the unrest in global trade and financial instability increase due to trade disputes between the U.S. and China and monetary tightening and if confidence in markets and businesses does not revive.”
It announced measures to help generate jobs and raise income for the poor as low-income and elderly people were hardest hit by the sluggish jobs market. That includes increasing benefits, welfare and jobs for senior citizens, expanding unemployment benefits and giving more stipends to young people who are looking for their first job.
It also plans to give a temporary tax cut to car buyers to boost sales and consumption.
The official growth forecast was lowered to 2.9 percent for this year, compared with its December forecast of a 3.0 percent expansion.
The diminished outlooks were widely expected since the ministry’s earlier forecasts were seen as too optimistic.
Monthly jobs reports have shown that since February, the country added slightly more than 100,000 new jobs each month over a year earlier. In June, South Korea added 106,000 jobs over a year ago, compared with the 302,000 jobs added in June 2017.
The government partly blamed the shrinking population for the somber job market. Economists said they showed the economy is expanding without adding many jobs.
Slashing its employment outlook nearly by half could hurt Moon, who has been enjoying high approval ratings thanks to his administration’s diplomacy toward North Korea.
Moon’s economic policies have centered on increasing income and creating jobs, but the decline of labor-intensive industries like auto manufacturing and shipbuilding has hindered those efforts.
The best performing industry, semiconductor manufacturing, has thrived thanks to strong global demand for high-performing smartphones and data centers but is highly automated and tends to create few jobs.
“We are getting closer to a world where we need microchips but we don’t need humans,” said Chung Chang-won, an analyst at Nomura Securities.
