Joblessness in South Korea at 14-Year High

South Korea's job market is under strain from not only a rising unemployment rate but also an increasing number of people who have been jobless for a long time, data showed Sunday.

The number of jobseekers surpassed one million in 2016 for the first time since 2000, according to Statistics Korea. Of the total, 133,000 were unemployed for more than half a year, accounting for 13.1% of the unemployed, Yonhap reported.

It marks the highest number since 13.8% was posted in 2002. The rate reached double digits in 2015 after staying between 6-9% since 2008. The number of people trying to find jobs for one year or longer also topped 9,000, or 0.9%.

The trend adds to worries that Asia’s fourth-biggest economy might have entered a chronic economic slump, not a temporary downturn. “Such a long-term unemployment phenomenon appears to be attributable to fierce competition for a declining number of jobs in the face of more jobseekers,” a Statistics Korea official said.

Experts said it's yet another indication that the low growth of the South Korean economy is being protracted. “It is evidence of low growth being prolonged,” said Byun Yang-kyu, a senior researcher at the Korea Economic Research Institute. “In particular, there is a severe impact from a reduction in the number of manufacturing jobs.”

The unemployment problem is expected to exacerbate in 2017 amid the restructuring of the shipping and shipbuilding fields.

The government and the Bank of Korea predicted that only 260,000 new jobs may be created in the year, with the unemployment rate climbing to 3.9% from 3.7% in 2016.

The Hyundai Research Institute said unemployment is likely to rise to 4.1% this year, the first time it would exceed 4% since 2001, when the country was reeling from the aftermath of the Asiawide financial crisis.

“There are many companies reluctant to hire employees, with external and internal uncertainties growing,” said an official in charge of a conglomerate’s human resources team.

Chronic Debt Problem

South Korea's financial authorities are increasingly concerned about the debt risk of self-employed people, striving to address the chronic household debt problem, officials said Sunday.

Household credit in the major Asian economy totaled 1,295.8 trillion won ($1,098 billion) as of end-September last year, up 11.2% from a year earlier. The volume has apparently exceeded 1,300 trillion won, given the trend of monthly growth.

Announcing its policy direction for 2017, the Financial Services Commission said handling the household debt issue will be a top priority. In a positive sign, an increase in the amount has slowed a bit since the government took a set of policy measures in October last year, which include the expansion of tighter screening of borrowing qualifications, according to the regulator.

Loans extended by banks to households rose by 19.7 trillion won in the last quarter of 2016, less than 23.3 trillion won posted during the same period of the previous year, showed its data.

"In the current stage, household debt is at a manageable level in general," said Doh Kyu-sang, head of the FSC's financial policy bureau. He cited an improvement in the "quality" of household debt and the soundness of the country's lenders.

Nonetheless, he added, there remain "vulnerabilities", especially with regard to sole proprietors and low-income households with excessive mortgages amid looming interest rate hikes and a prolonged economic slump.

The debt service ratio of self-employed people jumped 4.9 percentage points on-year to 35.5% in 2016. "Their troubles will likely grow due to sluggish domestic spending. And there are various types of businesses they own and debt woes," Doh added. "Thus, efforts for tailored (risk) management are necessary."

The FSC will provide policy support for them and also push for a longer-term strategy to deal with the household debt problem itself.

The commission plans to unveil a road map by March for upgrading the system to screen borrowing qualifications.