Employment falls for first time in 17 months, raising 'jobless growth' fears

South Korea's total employment fell in May for the first time in 17 months, deepening concerns that the country has fallen into a "jobless growth" trap. Exports have hit record highs on the back of a semiconductor boom and nominal GDP growth has climbed into double digits, yet jobs — particularly in manufacturing and among young workers — are disappearing. Analysts say the disconnect between economic expansion and employment is becoming increasingly pronounced.

The number of employed people aged 15 and older stood at 29.12 million in May, down 40,000 from a year earlier, according to employment data released Thursday by the Ministry of Statistics. It was the first year-on-year decline since December 2024, when employment fell by 52,000.

Employment had grown by 108,000 in January before the pace of gains widened to around 200,000 in February and March, then narrowed sharply to 74,000 in April.

The employment rate for those aged 15 and older fell 0.5 percentage points from a year ago to 63.3 percent, marking a second consecutive month of decline following April's 0.2-percentage-point drop. The decline was the steepest since February 2021, when the rate fell 1.4 percentage points.

By sector, manufacturing shed 140,000 jobs, extending its losing streak to 23 consecutive months. The decline was more than double April's drop of 55,000 and was the steepest since February 2019, when manufacturing lost 151,000 jobs. Construction employment fell for the 25th straight month. Agriculture, forestry and fishing lost 121,000 jobs, while professional, scientific and technology services shed 89,000 and wholesale and retail trade lost 36,000.

The employment shock hit young workers particularly hard. The number of employed workers aged 15 to 29 fell 255,000 from a year earlier. The youth employment rate dropped 2.4 percentage points to 43.8 percent, and the youth unemployment rate rose 0.6 percentage points to 7.2 percent.

The government attributed the slowdown to growing external uncertainty stemming from the prolonged Middle East war.

Bin Hyeon-jun, director general of social statistics at the Ministry of Statistics, said supply disruptions in some industries and the impact of high oil prices linked to the prolonged Middle East conflict appeared to be driving the employment decline. He added that while semiconductor exports are leading export growth, semiconductors account for only about 4 percent of total employment, meaning the surge in exports has not prevented manufacturing jobs from falling.

According to the Bank of Korea, nominal GDP grew 10.5 percent quarter-on-quarter in the first quarter of this year — the first double-digit growth rate since 1976. Semiconductor export gains are lifting GDP, but the benefits are not flowing through to broader hiring in manufacturing. Meanwhile, traditionally job-intensive sectors such as construction, wholesale and retail trade, and agriculture are all struggling. Youth employment has hit what analysts describe as its worst point in years, deepening the sense that the real economy is deteriorating.

The government has pledged to expand youth employment programs and support for industrial transition, but analysts warn that if the gap between growth and job creation continues to widen, the "jobless growth" debate will only intensify.

Experts advised that the large profits generated by chipmakers should be channeled into investment in high employment-multiplier industries such as construction to create quality private-sector jobs.

Kim Jeong-sik, an emeritus professor of economics at Yonsei University, said calls for the government to "redistribute" the large profits earned by chipmakers would do little to create jobs for young people. "The government needs to increase public investment in sectors like construction, funded by the taxes these companies pay — that is what will revive the youth labor market," he said.