Jobless rate to top 3.7% in 2012: think tanks

Korea’s unemployment rate is expected to slightly rise next year on the back of sluggish economic growth at home and abroad, leading private think tanks said Sunday.

LG Economic Research Institute forecast the country’s jobless rate will be 3.7 percent next year, while Hyundai Research Institute predicted 3.6 percent. Both figures are up from this year’s estimated 3.5 percent.

Samsung Economic Research Institute predicted a 3.4 percent rate. But it indicated a possible rise, citing lackluster job growth in the public sector.

“Manufacturing has been leading the overall employment growth as exports bounce back after the 2008 financial crisis, boosting investments and production,” said Lee Ji-sun, an LGERI researcher.

“But aggravating external conditions amid the European fiscal crisis, plus Japan’s economic recovery, seem to be directly impacting exports and the local economy.”

In a report released last week, the Bank of Korea estimated the number of new hires at 280,000 for next year, down more than 31 percent from 407,000 so far this year. It also slashed the country’s 2012 growth outlook to 3.7 percent.

LGERI’s initial forecast came in at slightly more than 200,000 new hirings, but later revised it up to between 250,000 and 300,000 on the government’s drive to create more jobs.

Job insecurity has long been a matter of concern for the government and economists as it could prompt a cutback in consumption, retard economic growth and further dampen the already fragile labor market.

If less than 300,000 people get on the payroll next year, the nation’s entire consumption could start tottering, economists said.

“If we fail to secure 300,000 new jobs, we will have to fret about a crunch in domestic demand,” said Lee Sang-jae, chief economic analyst at Hyundai Securities.

Since a 4.4 percent peak in 2000, Korea’s jobless rate has fallen and hovered between 3.2 percent and 3.7 percent even during global slumps in 2008-9.

However, employment in manufacturing, the foremost driving force behind Korea’s economy, has slowed down since April in the face of looming debt calamities in Europe and the U.S., government data showed.

“A slowdown in rich economies and shrinking investments by local companies will reduce new jobs in export and manufacturing industries,” Hyundai Research Institute said.

Brokerages remained more upbeat, expecting a modest improvement for the job market next year.

Woori Investment & Securities and Hyundai Securities projected that around 300,000 will be newly hired, while Daishin Economic Research Institute forecast 260,000.

“The manufacturing sector will not add many jobs, but job growth will continue in the service sector,” said Lee Seung-hoon, an economist at Samsung Securities.

By Shin Hyon-hee (heeshin@heraldcorp.com)