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South Korea’s Unemployment Rate Declines to a 3-Month Low

South Korea’s unemployment rate fell to a three-month low as an economic recovery spurred hiring at manufacturers and health and social welfare service providers.

The jobless rate fell to 3.6 percent in April from 4 percent in March, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 12 economists was for a rate of 3.8 percent.

An improving job market, combined with higher energy and food costs that are fueling inflation at home, may compel the Bank of Korea to raise its benchmark interest rate to 3.25 percent when it meets on May 13, according to economists surveyed by Bloomberg News. The central bank has already raised rates twice this year to tame consumer-price growth running at close to a 29-month high.

“The economy remains pretty strong and inflation has stayed above the central bank’s target,” Yoon Yeo Sam, a fixed-income analyst at Daewoo Securities Co. in Seoul, said before the release. “The central bank may increase the interest rate again as early as this week.”

The won rose 0.1 percent to 1,082.38 against dollar at the 3 p.m. close in Seoul on May 9, according to data compiled by Bloomberg. The currency has risen 3.9 percent so far this year, more than most Asian currencies. The benchmark Kospi stock index dropped 0.4 percent. The financial markets were closed yesterday for a national holiday.

Bank of Korea

The BOK kept borrowing costs at 3 percent on April 12 after raising them in January and March, with inflation breaching its 4 percent ceiling in each of last four months. It will raise the seven-day repurchase rate to 3.25 percent on May 13, 12 of 14 economists surveyed by Bloomberg News predict.

Central Bank Governor Kim Choong Soo said the bank will normalize interest rates neither too slowly nor too fast. The bank projects economic growth of 4.5 percent this year, slowing from a 6.2 percent pace in 2010, and forecasts inflation will accelerate to 3.9 percent from 2.9 percent.

“Price stability and economic equity will top the political and policy agenda” until the presidential election late next year, Kwon Young Sun, a Hong Kong-based economist at Nomura Holdings Inc., said in a note on May 9. Kwon expects the central bank to raise the interest rate in May and July to 3.5 percent.

The seasonally unadjusted jobless rate was 3.7 percent in April, compared with 4.3 percent in March, today’s report showed. The number of employed people increased by 379,000 to 24.3 million last month from a year earlier.

Employment in manufacturing climbed 2.9 percent from a year earlier, while the number of people self-employed or working in the public-service sector rose 2.7 percent.

The number employed in construction fell 3.2 percent, while jobs in the agricultural, fishery and forestry industries increased 0.8 percent.

The finance ministry projected in December that the annual average unemployment rate will probably fall to 3.5 percent in 2011 from 3.7 percent last year, as the nation adds 280,000 jobs.

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