South Korea’s Jobless Rate Jumps as Political Row Hits Economy

(Bloomberg) -- South Korea’s unemployment rate rose to the highest level in more than three years as the number of jobs dropped, offering further evidence of an economy shaken by a martial-law row and a deadly airline crash.

The seasonally adjusted jobless rate jumped to 3.7% in December from 2.7% in the previous month, hitting the highest point since June 2021, according to data released by the national statistical office on Wednesday. Separately, South Korea lost 52,000 jobs compared with a year earlier, in the first contraction since February 2021.

The deterioration in the job market comes as consumer and business confidence slump by the most since the outbreak of Covid-19. Sentiment in the country has been rocked by President Yoon Suk Yeol’s short-lived martial law decree on Dec. 3, which sent stock markets tumbling and weighed on the won that was already Asia’s worst performing currency last year.

Yoon faces an arrest warrant on charges of insurrection and the Constitutional Court is deliberating on an impeachment motion passed against him by parliament. The political turmoil adds to headwinds for South Korea’s trade-reliant economy at a time when Donald Trump is set to return to the White House with tariff plans, which the Bank of Korea cited as a reason for unexpectedly cutting its key interest rate again in November.

Pessimism over the economy grew further when a Jeju Air passenger plane crashed at a southwestern airport in late December, killing 179 people onboard. It was the worst aviation disaster ever seen on South Korean soil.

The BOK is set to meet Thursday for the first decision of the year. A majority of economists expect the central bank to cut the rate for a third time in a row, as policymakers tighten their focus on shoring up economic momentum.