Bank of Korea: "COVID-19 Employment Shock Will Take Significant Time to Recover"

Bank of Korea to Announce 'December Monetary and Credit Policy Report' on the 10th

[Asia Economy Reporter Jang Sehee] Considering past cases of the foreign exchange crisis and the financial crisis, it is forecasted that even after the novel coronavirus infection (COVID-19) subsides, employment will remain sluggish for a considerable period.

On the 10th, the Bank of Korea stated in its 'December 2020 Monetary and Credit Policy Report' that "Looking at employment trends during past crises, there is an asymmetric recovery pattern where it takes longer to return to pre-crisis levels than the period during which the number of employed persons decreased," and added, "Even if COVID-19 subsides and the economy recovers to pre-crisis levels, it will be difficult for employment sluggishness to be resolved in the short term."

During the foreign exchange crisis, the number of employed persons decreased by 1.48 million, and it took 31 months to recover to previous levels. The number of employed persons decreased for 8 months, but it took 23 months to recover. During the financial crisis, the number of employed persons decreased for 6 months and recovered over 10 months, taking 16 months in total to return to pre-crisis levels.

The report pointed out that a characteristic of the COVID-19 employment shock is the increase in temporarily laid-off workers and discouraged job seekers. This is expected to lead to a continued decrease in new hiring by companies.

The report expressed concern, stating, "Until the return of temporarily laid-off workers and unemployed persons, which greatly increased after COVID-19, is substantially resolved, new hiring may be reduced or postponed, causing employment recovery to proceed slowly." This is because companies tend to prefer reinstating existing workers over new hiring in terms of search periods and recruitment costs.

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