Labor Institute Halves Its Employment Growth Forecast
The Korea Labor Institute has forecast an increase of 103,000 employed persons this year compared to last year. This is a downward revision to about half the level of the previous forecast of 210,000 given at the end of last year.
On August 6, the Korea Labor Institute published an employment and labor brief titled “Evaluation of the Labor Market in the First Half of 2026 and Outlook for the Second Half of the Year,” which contained these findings.
The institute explained that its projection for an increase of just over 100,000 employed persons is because growth is heavily concentrated in the semiconductor sector.
The institute noted, “While semiconductors are driving the overall growth rate, their job creation effect remains limited. The overall employment trend is determined by the domestic demand and non-semiconductor sectors, which account for the largest share of total employment. Whether there is an improvement in employment in the second half of the year will depend less on the economic growth rate and more on a genuine recovery in the domestic demand and non-semiconductor sectors.”
According to the institute, this year’s average annual employment rate is expected to be 62.7%, down 0.2 percentage points from last year, and the unemployment rate is projected to rise to 2.9%, up 0.1 percentage points. It is rare for both the employment rate to fall and the unemployment rate to climb in the same year; it has only occurred in 2003, 2009, 2018, and 2020 since 2000.
The institute diagnosed that the recent slowdown in employment growth among people aged 60 and older, combined with the burdens of high oil prices, high exchange rates, inflation, interest rates, and external uncertainty, make a significant recovery in private consumption unlikely, which in turn means that employment related to domestic demand is not expected to improve significantly.
The institute added, “While increased demand for health and welfare services and the government’s job-creation programs for seniors may provide some support to employment growth in the second half of the year, hiring adjustments in the knowledge-based services sector and continued sluggishness in manufacturing and construction are likely to result in only a limited overall increase in employment.”
To prevent further deterioration in employment, the institute emphasized the urgency of stabilizing the consumption base and supporting groups experiencing severe employment shocks, such as the younger generation and those in their early 60s. The institute pointed out, “For young people, a delay in entering the labor market could lead to future losses in wages and work experience. It is necessary to encourage companies to recruit new hires and to seek ways to provide vocational training-linked employment opportunities to supplement the lack of jobs in the private sector.”
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The institute also recommended, “For those in their early 60s, it is important to promote continued employment in their primary jobs while strengthening support for job change and reemployment among vulnerable groups.”
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