“Business Has Bottomed out in the Fourth Quarter of Last Year”

The Korea Development Institute (KDI) forecasted that the Korean economy is likely to have bottomed out in the fourth quarter of last year, and the economic growth will exceed 4.1 percent, the precious growth estimation. Meanwhile, it also said that the jobless rate for youth was high and showed the character of "structural unemployment." Thus the KDI urged the government to prepare measures for the unemployment of the youth.

According to the KDI`s "January report on the economy." which was released yesterday, "While the industrial output and shipment slightly increased in last December, the inventory level decreased. It is highly possible that the economy has bottomed out in the fourth quarter of last year."

The report said that the industrial output and shipment in last December increased by 3.3 percent and 2.5 percent on year in December, and the inventory level fell by 1.6 percent for the first time since November 1999.

The KDI explained that, "Many indicators showed an economic recovery such as the growth of the production in the service sector, the improvement of trading condition caused by the sudden rise of the semiconductor price, the rise of the indexes of the real estate market, and the index of the consumer`s expectation, etc."

However, the KDI reported that, "Although the number of the total employment in January increased by 3.6 percent and the participation rate of the economic activity rose, the high unemployment rate for youth has continued." The unemployment rate for 20s was 7.9 percent, which is three-times higher than the other age groups` rate, in January. It is worse that the previous month (7.5 percent) and January 2001(7.8 percent).

The KDI analyzed that, "The demand of the labor market is changing as the companies favor skilled people and they are reluctant to offer new positions. But youth`s job training has not change and they do not want to work for small manufacturing companies. Therefore, the unemployment problem for youth becomes a `structural unemployment` which does catch the demand of the job market."

The KDI emphasized that, "The unemployment for youth will cause a social problem and will influence a negative effect on the potentiality of economic development, due to the deficiency of the trained human resources. The government should prepare its measures after a thorough understanding of the situation."

Joong-Hyun Park sanjuck@donga.com