(Bloomberg) -- South Korean unemployment unexpectedly dropped to a record low in August as restrictions to combat the nation's worst virus outbreak prevented job seekers from searching for work.
The jobless rate tumbled to 2.8% from 3.3% in July as the economic participation rate declined, the statistics office said Wednesday. Economists had expected an increase to 3.5%. Still, the economy added 518,000 positions from a year earlier, a sixth straight month of gains.
Government officials had expected the labor market to deteriorate in August, reflecting a virus wave that put Seoul under a semi-lockdown in mid-July. With the jobless rate coming in below market consensus for a second month, the reasons behind the low readings will be scrutinized by the Bank of Korea as it mulls the timing of a second interest-rate hike.
Of key interest in today's data was the economic participation rate, which declined to 62.8%, the lowest since March.
The report also showed retail and wholesale industries took a beating, shedding 113,000 roles. Manufacturing lost 76,000 jobs. Employment increased by 243,000 in healthcare and social welfare, which are largely impacted by government programs.
South Korea's economy has largely held up during the latest outbreak, with exports and investment powering ahead and the damage to consumption smaller than expected. That allowed the BOK to proceed with a rate hike in August, with strong signals that policy normalization will continue to counter risks from financial imbalances.
The job market may receive support from emergency handouts to most households. The government is hoping the extra cash will be funneled to small mom-and-pop stores hit by Covid restrictions.
The fully-vaccinated share of the population has also reached 40%, allowing a targeted easing of virus restrictions that should support the services industry.
(Updates with further details from report.)
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