Economics - Data Reactions 11 January 2017
Korea 2016 was another shaky year for job seekers The seasonally adjusted jobless rate unexpectedly declined from 3.6% (nsa: 3.1%) to 3.4% (nsa: 3.2%) in December (HSBC: 3.7%, consensus: 3.6%), despite the labour force participation rate increasing from 62.9% to 63.1% during the same period. The surprise mainly came from stronger employment creation in services and construction, which is likely due to the unusually warm weather in December last year, while the manufacturing sector continued to shed jobs at an accelerated pace. The job market remains on the downturn trend, especially with employment growth slowing in 2016 compared to previous years.
James Lee Korea and Pan-Asia Economist The Hongkong and Shanghai Banking Corporation Limited +852 2822 1647
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Facts 4 Employment rose 1.12%y-o-y (or +289k) in December, with the pace slowing from 1.29%y-oy (or 339k) in November. Looking at 2016 as a whole, employment growth averaged 1.15%y-oy, slowing from 1.32% in 2015 and 2.14% in 2014. 4 The jobless rate has averaged 3.7% in 2016, albeit in a volatile manner, moderately rising from 3.6% in 2015 and 3.4% in 2014. In some part, this is due to the gradual rise in the labour force participation rate to an average 62.8% in 2016, up from 62.6% in 2015 and 62.4% in 2014. 4 The manufacturing sector continued to shed jobs on an over-year-ago basis since July 2016, while the pace has accelerated in 2H16. This is not a big surprise given the ongoing restructuring in the shipbuilding industry, while the manufacturing operation rate remains around post-GFC lows. Indeed, job creation in manufacturing fell 2.5% in December. 4 Some of this weakness was partly offset by stronger employment growth in services as well as construction more recently. Service employment, which accounts for more than two-thirds of jobs, was up 1.8%y-o-y in December, while construction employment increased 4.7%.
Implications The weak job growth in the manufacturing sector is likely to continue, given the low level of capacity utilization and limited pickup in manufacturing outside the tech industry. The outlook will heavily depend on exports, and thus global demand for goods, which is unlikely to pick up materially in volume terms, although recent strong PMI readings suggest some cyclical rise in the current quarter. In terms of GDP growth, we continue to forecast a slowdown from 2.7% in 2016 to 2.4% in 2017, which should spur further easing from the Korean central bank given its firm external position (Bank of Korea Watch: Capital outflows not an obstacle to easing, 10 January 2017). The BoK is likely to cut the policy rate by another 25bp in 2Q17, in our view, although the exact timing remains fluid on global financial market conditions.
Economics - Data Reactions Korea 11 January 2017
Figure 1: Korea's unemployment rate unexpectedly fell in December 2016
Figure 2: Labour force participation rate gradually rose in 2016
Source: CEIC, HSBC
Source: CEIC, HSBC
Figure 3: Manufacturing continues to shed jobs at an accelerate pace
Source: CEIC, HSBC
Economics - Data Reactions Korea 11 January 2017
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Additional disclosures 1 2 3 This report is dated as at 11 January 2017. All market data included in this report are dated as at close 11 January 2017, unless a different date and/or a specific time of day is indicated in the report. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner. You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument.
Economics - Data Reactions Korea 11 January 2017
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