Korea Labor Institute Halves Job Growth Forecast Amid Semiconductor Sector Dominance

South Korea's economic outlook for the latter half of the year appears dimmer, with the Korea Labor Institute (KLI) drastically cutting its employment growth forecast. The institute now predicts only 98,000 new jobs, a sharp decrease from the previously projected 200,000. This downward revision reflects a growing concern over the economy's reliance on the semiconductor industry, which, despite its strength, generates fewer jobs compared to other sectors.

The KLI's report, based on an analysis of economic activity data, points to a widening gap between economic growth and job creation. In the first half of the year, job growth reached 108,000, falling short of expectations. The institute noted that employment gains were concentrated among specific age groups, such as those in their 40s and 50s, and within certain industries. This concentration, coupled with a weakening link between overall economic expansion and job creation, prompted the revised forecast.

A key factor contributing to this trend is the semiconductor industry's low employment inducement coefficient, which measures the number of jobs created per unit of investment. The KLI found this coefficient to be less than half that of the manufacturing sector average. Furthermore, the benefits of the semiconductor boom have not broadly spread across the supply chain. While major semiconductor companies reported high operating profit margins, smaller suppliers in materials, components, and equipment saw significantly lower profitability.

The quality and quantity of employment have also deteriorated, particularly for young people. Job growth declined in sectors like information and communication technology and professional, scientific, and technical services, which are typically favored by younger workers. The number of regular, full-time positions also saw a substantial decrease among youth. Conversely, self-employment and non-wage work have increased for the first time since the COVID-19 crisis, though this is not seen as a sign of economic recovery due to a decline in wage employment and a record number of business closures. The report also indicates signs of prolonged unemployment, with an increase in those unemployed for three to six months or longer.