Gov`t claims Oct. job leap bonanza but experts skeptical

“To borrow an expression from the new generation, we hit the jackpot in employment. With the economic activity rate growing and unemployment falling, the controversy over the blind spot of unemployment in job statistics has been completely cleared up.”

This is what Strategy and Finance Minister Bahk Jae-wan said Wednesday at a crisis management countermeasure meeting after seeing employment indicators.

Employment indicators that Statistics Korea released Wednesday looked perfect on the surface. Unemployment in October was 2.9 percent, down from 3.3 percent year-on-year and the lowest since November 2002 (2.9 percent).

This is considered “full employment” according to economics textbooks and means all people willing to work landed jobs. The number of the employed grew 501,000 in October year-on-year, the largest growth since May last year when 586,000 jobs were added.

A high-ranking Strategy and Finance Ministry official said, “As employment indicators are the results of a sample survey that show trends, we need only see the unemployment rate and the number of the employed.”

Experts, however, call the favorable indicators close to a statistical illusion.

Another problem is that most of the jobs added were for those in their 50s and 60s.

The biggest reason for the “abnormally” low unemployment rate was an excessively large number of youths and economically inactive women. The unemployment rate is the share of the unemployed out of the number of the economically active population. If the number of the latter grows, unemployment naturally declines.

According to Statistics Korea, the number of economically inactive people among those between age 15 and 24 was 4.55 million out of a combined 5.98 million in October. The economic activity rate in this age bracket was 23.9 percent, less than half the Organization for Economic Cooperation and Development average of 48.5 percent.

Even if the age bracket is widened to those aged between 15 and 29, the figure was 42.4 percent, still lower than the OECD average for the 15-24 age range. The number of working women was said to have risen, but the women’s economic activity rate was a mere 50.1 percent.

The mismatch between employment indicators and reality was also attributed to sloppy questionnaires used to compile data.

Statistics Korea conducts a sample employment survey of 32,000 households nationwide every month. Respondents are asked if they have sought jobs over the past four weeks. If they say no, then it asks their willingness to get jobs. According to the Korea Development Institute, the number of economically inactive persons will grow if they give a passive answer.

In an analysis conducted in May, the state-run think tank warned that the potential unemployment rate, or the share of the virtually jobless, will shoot up from 5 percent to 21 percent if unemployment is calculated by the method used by the International Labor Organization.

Hwang Su-gyeong, a researcher for the Korea Development Institute, said, “Only those who worked less than one hour the previous week and actively sought jobs over the past four weeks are called unemployed. Under this rigorous standard, we cannot detect potential jobless people.”

Even if employment statistics are considered credible, the data shows the weaknesses of the job market. Among the 501,000 jobs created in October, 490,000 were for those in their 50s and 60s. By age, 300,000 jobs were added for those aged between 50 and 59 and 192,000 jobs for those over 60. By contrast, no job was created for those in their 20s and those in their 30s saw 66,000 jobs evaporate.

The number of the self-employed rose for three consecutive months to 5.73 million in October, up 107,000 or 1.9 percent from the same month last year. The figure grew a whopping 450,000 over 10 months in January, when the country had 5.28 million independent business people. In contrast, the number of those employed in manufacturing dropped 1.3 percent (55,000) over the same period. The employment statistics show that retirees in their 50s and 60s started their own businesses to support their unemployed children and save for retirement.

Sohn Min-jung, a senior researcher at Samsung Economics Research Institute, said, “With the number of jobs growing for those over age 50 in the service sector, we have little room to explain the job growth from the perspective of favorable economic conditions.”

january@donga.com