The number of employed people compared to the same period last year has continued to increase for three consecutive months (January to March), but the construction and manufacturing sectors have not escaped the employment cold wave. The number of employed people in the construction and manufacturing sectors has decreased for 11 months and 9 months, respectively.
There are no signs of improvement in the construction industry's economy, and it is expected that the trade policies of the Trump administration will also affect manufacturing exports, making it difficult for employment indicators in both sectors to improve in the near term.
◇ Employment in construction sector is at its 'worst' since the industrial classification overhaul in 2013
According to the 'March Employment Trends' released by Statistics Korea on the 9th, the number of employed people increased by 193,000 compared to the same period last year. However, the construction and manufacturing sectors have not escaped the employment cold wave. The number of employed people in the construction sector decreased by 185,000 (8.7%) compared to the previous year. This is the largest decrease in both amount and percentage since the overhaul of industrial classification by Statistics Korea in 2013. The number of employed people in the construction sector has decreased for 11 consecutive months, marking the longest period of decline in history.
The recession in the domestic construction industry has stemmed from skyrocketing construction costs due to high interest rates and rising raw material prices. Subsequently, the economic downturn and decrease in orders have reduced the supply of dwellings, and coupled with the deterioration of real estate project financing (PF) and strengthened loan regulations, the market has plunged into a deep recession. This year, Daewoo Shipbuilding & Marine Engineering, SAMBU Construction, and others have consecutively filed for court receivership, raising anxiety throughout the construction sector.
Once a driver of South Korea's economic growth, investment in construction has now become a factor that erodes growth rates. Last year, the contribution of construction investment to growth was -0.4 percentage points. This means that construction investment lowered the domestic gross domestic product (GDP) growth rate by 0.4 percentage points. Considering the employment contraction and decrease in household income, the impact of the construction industry on the overall economy is even greater. In the fourth quarter of last year, the average monthly earned income of household heads employed in the construction industry fell by 1% compared to the same period last year.
The downturn in the construction industry is expected to continue this year. The Korea Institute of Construction Technology also noted that "the construction industry entered a serious recession in the second half of last year, and this trend is expected to persist this year." The Bank of Korea predicts that construction investment will decrease by 2.8% compared to the previous year.
◇ Manufacturing is hit by Trump's 'high tariffs' pressure... employment slowdown inevitable
The situation in the manufacturing sector, which accounts for about 30% of South Korea's GDP, is also not good. In March, the number of employed people in manufacturing decreased by 112,000 compared to the same month last year. Statistics Korea explained that the decline in employed people was particularly noticeable in the domestic light industry, machinery manufacturing, and pulp sectors.
The outlook is not bright either. Trump's high tariff policy is expected to impact the manufacturing sector, which leads South Korean exports. Trump is currently imposing tariffs of 25% on automobiles and auto parts, and 25% on the steel and aluminum sectors, along with a reciprocal tariff of 25% on South Korea. Tariffs on semiconductors and biotechnology are also expected to be announced soon.
The government is also worried about decreased exports and employment slowdown due to high tariffs. A Ministry of Economy and Finance official noted, "If exports slow down due to the tariff war, employment will worsen, especially among export-oriented corporations," adding, "Given the significant external risks, there is a possibility that employment could worsen to a level statistically observable."
Some analysts predict that the sluggishness in the construction and manufacturing sectors will limit the increase in the number of employed people this year. The Bank of Korea projected an increase in the number of employed people this year at 100,000, which is a decrease of 30,000 from the previous forecast of 130,000 and 60,000 from the increase in employed people last year (160,000).
The Bank of Korea stated, "Amid the continued sluggish employment in manufacturing, the contraction in construction investment and delayed domestic recovery will exacerbate employment declines in the construction and face-to-face service sectors."