South Korea’s unemployment rate has risen to a 3-1/2-year high amid political unrest.

By Jihoon Lee

SEOUL (Reuters) – South Korea’s unemployment rate hit a 3-1/2-year high in December. The year.

The unemployment rate rose to a seasonally adjusted 3.7% last month, the highest since June 2021 and up sharply from 2.7% in November, Statistics Korea reported.

The number of people employed fell by 52,000 in the 12 months to December after a gain of 123,000 in November. It was the first fall since February 2021.

After releasing the data, the Finance Ministry said the labor market had weakened as consumer sentiment weakened due to political unrest, while citing the temporary effects of canceled government employment projects.

Last month, consumer confidence fell to its lowest level since late 2022, while business sentiment was at its weakest in more than four years, hit by an unprecedented constitutional crisis over President Yoon Suk-yeol’s short-lived martial law order on Dec. 3, 2010.

“While employment is not a policy mandate for the Bank of Korea, it will inevitably influence the central bank’s monetary policy because it is still an indicator of the continuation of the economic cycle,” said Park Sang-hyun, an economist at IM Securities.

The Bank of Korea is expected to cut rates by 25 basis points for a third consecutive meeting on Thursday, a month earlier than previously expected, although a weaker local currency could be a headache for policymakers.

(Reporting by Jihoon Lee; Editing by Chris Reese and Shri Navaratnam)