Employment Hit Hard by Middle East Risks... Even Semiconductors Couldn't Save Jobs (Comprehensive)

May Employment Trends: Number of Employed Drops by 40,000
Semiconductor Sector Accounts for Only 4% of Jobs
Youth Employment Posts Largest Decline in 5 Years and 4 Months
Sharp Generational Divide: Forties Down, Sixties Up

Last month, the number of employed people fell by 40,000 compared to a year earlier, marking the first decline in 17 months. The prolonged Middle East war and high oil price risks have severely impacted the overall industrial sector, causing jobs in manufacturing—a pillar of the domestic economy—to drop by the largest margin in seven years and three months. Youth employment also saw the sharpest decrease in five years and four months since the spread of COVID-19, raising alarms across the entire job market.

According to the "May Employment Trends" released by the Ministry of Data and Statistics on June 11, the number of employed people last month was 29.12 million, representing a decrease of 40,000 from the same month last year. This marks the first decline in employed persons since December 2024 (down 52,000), when internal consumption shrank due to the aftermath of the 12·3 martial law, 17 months ago. This year, employment started with an increase of 108,000 in January, maintained the 200,000 range in February (234,000) and March (206,000), but sharply contracted to 74,000 in April, eventually turning negative in May.

The employment rate for those aged 15 and over was 63.3%, a decrease of 0.5 percentage points from a year earlier—the largest drop in five years and three months since February 2021. The OECD-comparable employment rate for those aged 15 to 64 also fell by 0.3 percentage points to 70.2%. However, the 15–64 employment rate was the second highest ever for May, and the 15-and-over rate was the fourth highest on record for May since statistics began. Last month, the economic activity participation rate stood at 65.2%, down by 0.4 percentage points year-on-year.

Direct Hit from Middle East Risks and Soaring Oil Prices... Semiconductors Create an 'Illusion' of Boom

The main causes of this employment crisis are the prolonged external risks and a reverse base effect following last year's employment boom. Bin Hyunjun, Director of Social Statistics at the Ministry of Data and Statistics, analyzed, "The prolonged Middle East war has led to rising prices and disruptions in raw material supply, and high oil prices have had a broad impact on various industries."

By industry, manufacturing saw the steepest decline. The number of manufacturing jobs plunged by 140,000 compared to a year ago, marking the largest drop in seven years and three months since February 2019 (down 151,000). Although external exports—especially semiconductors—have been performing well recently, the semiconductor industry accounts for only about 4% of total employment and has a low employment inducement coefficient, so it failed to spur job creation across manufacturing as a whole. In contrast, a sharp decrease in the automobile industry, which was directly affected by high oil prices and inflation, as well as a reversal to a decline in the food industry, drove the overall drop in manufacturing jobs.

In addition, key domestic and industrial sectors such as agriculture, forestry and fisheries (down 121,000), professional, scientific and technical services (down 89,000), construction (down 43,000), and wholesale and retail trade (down 36,000) also lost jobs. In particular, the professional, scientific, and technical services sector continued its decline for the sixth consecutive month since November last year, hit by a sluggish startup market and a downturn in architectural engineering. The wholesale and retail sector also saw a decline for three consecutive months, as consumer sentiment weakened and the expansion of online and unmanned automation in distribution persisted.

On the other hand, employment increased in sectors linked to fiscal jobs such as health and social welfare services (up 212,000), arts, sports and leisure-related services (up 44,000), and transportation and warehousing (up 36,000). In particular, transportation and warehousing, and accommodation and food service (up 20,000), benefited from the government's 'high oil price compensation fund' introduced at the end of April, which helped stimulate internal demand and served as a buffer against further job losses. Kim Taeung, Director of the Workforce Policy Division at the Ministry of Economy and Finance, explained, "Despite the overall growth in exports, rising raw material prices due to the prolonged Middle East war have accumulated as cost burdens."

Disappearance of Open Recruitment Deals Blow to Youth Employment... Surge in Highly Educated Unemployed

By age, the weakness in the job market was most pronounced among young people (aged 15–29). Youth employment plunged by 255,000 compared to a year earlier—the largest drop in five years and four months since January 2021 (down 314,000), during the COVID-19 outbreak. The youth employment rate also plummeted by 2.4 percentage points to 43.8%. Even factoring in natural declines due to population decrease, the drop was excessive.

Specifically, employment among those in their twenties fell by 251,000, and among those in their forties—the backbone of the economy—by 43,000. In contrast, employment increased among those aged 60 and over (up 171,000), those in their thirties (up 62,000), and those in their fifties (up 25,000), highlighting a clear intergenerational polarization. By gender, male employment declined by 55,000, while female employment increased by 15,000, marking a stark contrast.

By employment type, among wage workers, stable regular employees fell by 7,000, and temporary employees plummeted by 121,000, while daily workers grew by 14,000. Among non-wage workers, self-employed with employees increased by 80,000 and self-employed without employees by 29,000, but unpaid family workers decreased by 34,000.

The number of unemployed last month was 878,000, an increase of 3.0% (25,000) year-on-year. The unemployment rate rose by 0.1 percentage points to 2.9%. Especially notable was the surge in highly educated unemployed. Unemployed people with a college degree or higher numbered 503,000, a sharp increase of 60,000 (13.6%) from a year earlier, pushing the unemployment rate for those with a college degree or higher to 3.1%, up 0.3 percentage points. In contrast, unemployed high school graduates declined by 30,000 to 298,000, and those with a middle school education or less fell by 6,000 to 77,000, concentrating the burden of unemployment on the highly educated and the youth. Director Bin explained, "As companies have shifted from regular open recruitment to on-demand and experienced hiring, young people's entry into their first jobs is being structurally delayed."

Sharp Increase in Economically Inactive Population... Labor Hidden in 'Resting' Category

The number of people pushed out of the labor market also showed a clear upward trend. Last month, the economically inactive population reached 15.986 million, up by 264,000 (1.7%) from a year ago. By activity status, there were large increases in those engaged in housework (up 126,000) and in school or taking classes (up 124,000), while those engaged in childcare fell by 88,000.

In particular, the number of people who spent time not engaged in economic activity nor meeting job search criteria—the so-called 'resting' group—rose by 47,000 year-on-year to 2.437 million. By age, this category saw significant growth among those aged 60 and over (up 84,000). On the other hand, the number of people preparing for employment fell by 41,000 to 618,000 as entry into the labor market became more difficult, and the number of discouraged job seekers also declined by 9,000 to 337,000.

The government has pledged to mobilize the full capacity of all ministries to stabilize employment in vulnerable sectors such as youth and manufacturing/construction. Ko Yoon-chul, Deputy Prime Minister and Minister of Economy and Finance, said at the employment-related ministers' meeting that day, "Not only for the Youth New Deal project but also in formulating and implementing all economic policies, including structural reform, we will proceed in line with the voices and perspectives of young people."

The government has recently eased the requirements for the employment retention subsidy and implemented employment stabilization measures in areas densely populated by at-risk industries through the 'Butimium Project.' Going forward, it plans to swiftly support the overcoming of employment crises by designating employment crisis areas and special employment support industries. Additionally, it will steadily push forward the "Corporate Support-Employment Linked Fiscal Support Plan" to strengthen fiscal incentives for job-creating companies.

Furthermore, all ministries will work together to proactively respond to rapid industrial transitions such as AX and GX and changes in workforce demand for new industries, and swiftly prepare the "Basic Plan for Employment Stability during Industrial Transformation" currently in progress in order to support workers who need to change jobs in a timely manner.

Koo Yoon-chul, Deputy Prime Minister and Minister of Economy and Finance, is speaking at the Foreign Economic Ministers' Meeting held on the 10th at the Government Complex Seoul in Jongno-gu, Seoul. Photo by Yonhap News

This content was produced with the assistance of AI translation services.