Last month, the employment rate for those aged 15 and older reached an all-time high as of July. At the same time, the unemployment rate is at an all-time low. The number of employed people has increased by over 100,000 for seven consecutive months since January this year, but employment in the manufacturing and construction sectors, considered quality jobs due to their higher salary levels, continues to decline. Observations suggest that improving employment in the manufacturing and construction sectors will not be easy for the time being.
According to the 'July Employment Trends' announced by the Statistical Office on the 13th, the number of employed people aged 15 and older last month was 29,029,000, an increase of 171,000 compared to the same month the previous year. The employment rate for those aged 15 and older stood at 63.4%, up by 0.1 percentage points (p) compared to the same month last year. The employment rate for those aged 15-64, based on OECD comparison standards, was 70.2%, an increase of 0.4 p compared to the same month last year. Both figures are the highest for July on record.
The unemployment rate was 2.4%, down by 0.1 p from the previous year. This is the lowest level on record. Narrowing down to the youth group (ages 15-29), their unemployment rate is 5.5%, the same as in July of last year.
Overall employment levels appear positive, but the number of employed individuals in the construction and manufacturing sectors, considered quality jobs, has been declining for an extended period. The number of employed in construction has decreased for 15 consecutive months since May of last year, while manufacturing has seen a decline for 13 consecutive months since July of last year.
The number of employees in construction has exceeded 2 million each month since February 2021, when the impact of the COVID-19 pandemic was felt, but has not surpassed 2 million since dropping to 1.92 million in January this year.
Since the number of employees in construction began to decline from May of last year, the decrease has been less severe due to a base effect. However, expectations for a recovery in the industry outlook and an increase in employment numbers remain distant. Director Jang Ju-seong of the Ministry of Economy and Finance noted, "(In construction) the decline is still around 100,000," adding, "I don't see any signs of a positive turn in employment numbers or a significant improvement in the second half of the year."
The sluggishness in construction is becoming a factor that hampers economic growth in Korea. The Korea Development Institute (KDI), a national research institute, forecasted in its revised economic outlook released the previous day that construction investment is expected to decrease by 8.1% compared to last year. This figure has been revised down by 3.9 percentage points from the forecast made three months ago. This indicates that the outlook for the construction industry is not good.
KDI analyzed that the reduced construction orders during the high-interest period are reflected in investment performance, and the normalization of the project financing (PF) market is also delayed, making it difficult to improve the situation in the construction sector.
In June, construction orders decreased by 13.6% compared to the same month last year, and the trends of leading indicators are also not favorable. However, it is noted that the area under construction, which had been continuing a negative trend of decreasing by 37.8% year-on-year in January, saw a slight increase of 0.6% in June, which is considered a positive factor.
The government also perceives that improving the construction industry outlook is challenging. The Ministry of Economy and Finance analyzed in its recent economic trends report (the Green Book) published last month that there are negative indicators for future construction investment, such as the area of building permits in May falling by 12.1% year-on-year.
Considering that the contraction in the construction industry negatively impacts not only economic growth but also employment, the government has decided to devise plans for expanding investment and supporting construction workers.
The manufacturing sector is also facing difficulties. Weakness was observed in the apparel, paper, metal processing, and automotive manufacturing industries.
In particular, the impact of the Korea-U.S. tariff negotiations on future manufacturing employment is uncertain. If the tariff negotiations conclude successfully and overseas production factories return to the country, it could be a positive factor for employment, but conversely, there is also the possibility that domestic corporations may transfer a large number of production facilities to the United States to reduce tariff burdens.
The project 'Making American Shipping Great Again' (MASGA), which Korea and the United States are promoting for cooperation in the shipbuilding sector, may lead newly constructed and MRO quantities entering the country to head towards the United States. While domestic corporations participating in the project could generate new revenue, it is difficult to evaluate it as a boon for employment.
Director Jang said, "Generally, when overseas investment increases, domestic investment declines," and emphasized, "There is a need for policy responses to minimize the decline in domestic investment."
The economic crisis in the oil and chemical industry, which has been mentioned in relation to industrial restructuring, is also a source of concern. LG CHEM recently decided to dismantle some of its facilities at the Gumi and Naju plants, citing a decline in profitability. Yeocheon NCC, which was recently engulfed in a bankruptcy crisis, temporarily suspended operations at its Yeosu Plant No. 3 since the 8th.
Despite a significant decrease in the number of employed in the manufacturing and construction sectors, the overall increase in employment numbers is due to the rise in social services employment, particularly among the elderly.
Last month, the number of employed people increased by 263,000 only in the health and social services sector. Employment also rose in the professional, scientific, and technical services sector (91,000), as well as in the finance and insurance sector (38,000). By age group, the number of employed people increased among those aged 60 and older (342,000) and those in their 30s (93,000). In contrast, the numbers fell for those in their 20s (-135,000), 40s (-56,000), and 50s (-49,000).