Employed workers fall by 40,000, yet unemployment benefits also decline — are more people giving up on job searches?

The number of employed workers turned negative for the first time in 17 months, yet payouts and new applications for unemployment benefits have actually declined.

While a weakening labor market typically leads to more people claiming unemployment benefits, analysts say the conventional pattern is breaking down. Growing numbers of people who lose their jobs are leaving the labor market altogether rather than remaining unemployed and seeking work. The outsized loss of precarious jobs not covered by employment insurance is also seen as a significant factor.

According to the Ministry of Statistics' May employment trends report released Sunday, the number of employed people last month stood at about 29.12 million, down 40,000 from a year earlier — the first decline since December last year, when employment fell by 52,000. A prolonged slump in manufacturing and construction, compounded by deepening youth unemployment, has cast a chill across the broader labor market.

Unemployment benefit figures, however, told the opposite story. According to the Ministry of Employment and Labor, unemployment benefit payouts in May totaled 1.0328 trillion won (about $678 million), down 78 billion won, or 7.0 percent, from a year earlier. The number of new applicants also fell by 6,000, or 7.2 percent, to 78,000. Payouts have now declined for two consecutive months, while new applicants have fallen for four consecutive months.

Ordinarily, a drop in employment leads to a rise in unemployment benefits. But the unusual pattern of simultaneous declines in both employment and benefit claims has persisted in recent months.

Experts point to the growth of the economically inactive population as the primary cause. Last month, the number of economically inactive people — those capable of working but neither employed nor actively seeking work — reached about 15.986 million, up 264,000 from a year earlier.

Unemployment benefits are conditional on active job-seeking. As a result, even when employment falls, those who exit the labor market entirely rather than remaining unemployed and looking for work do not show up in benefit claim statistics.

The rise of the so-called "resting" population — people who are neither working nor looking for work — particularly among young people, reflects the same dynamic. It points to a growing number of people who, after losing a job amid an economic slowdown and a tough hiring environment, are abandoning their job searches rather than preparing to re-enter the workforce.

The number of employed youth fell by 255,000 in May, and the youth employment rate dropped 2.4 percentage points from a year earlier to 43.8 percent. The youth unemployment rate rose to 7.2 percent over the same period, but the increase in the economically inactive youth population was even larger.

The nature of the jobs lost has also played a role. The number of temporary workers last month stood at about 4.834 million, down 121,000 from a year earlier — a far steeper decline than the 7,000 drop recorded among permanent employees.

The problem is that temporary and short-term workers have low rates of employment insurance enrollment. Last year, 94.4 percent of full-time workers were enrolled in employment insurance, compared with just 47.6 percent of temporary workers.

Workers who lose their jobs without employment insurance coverage are ineligible for unemployment benefits. Analysts say a substantial portion of the employment decline has therefore occurred in precarious jobs outside the employment insurance system, meaning the shock has not been immediately reflected in benefit statistics.

The fact that unemployment benefits are a lagging indicator of labor market conditions is also a factor. Benefits are not paid out automatically upon job loss — claimants must go through a separation report and eligibility screening process. Applications can be filed up to 12 months after losing a job, meaning there is an inherent lag between the actual employment shock and when it shows up in the statistics.

"Not everyone who loses a job immediately applies for unemployment benefits," a Ministry of Employment and Labor official said. "There can be a certain time lag between employment trends and unemployment benefit statistics, and we are examining the detailed data."

However, experts caution against interpreting the current decline in unemployment benefits as a sign of labor market improvement. The fact that falling employment is showing up as an increase in the economically inactive population — rather than a rise in benefit claims — may itself signal diminishing vitality in the labor market.

There are also concerns that if the employment freeze drags on, pent-up benefit applications could surge belatedly, placing renewed strain on the employment insurance fund.