The Korea Labor Institute sharply revised down its forecast for this year's increase in employed persons from 210,000 projected at the end of last year to 103,000. Although semiconductor-led growth has significantly raised the economic growth outlook, its job creation effect is limited, so the first half increase in employed persons came to only about half of the initial projection. Weakness in youth employment deepened in the first half, and the increase in regular employees, the most stable positions in the labor market, also slowed markedly.

In its Employment and Labor Brief released on the 6th, titled “Assessment of the Labor Market in the First Half of 2026 and Outlook for the Second Half,” the Korea Labor Institute analyzed that “the labor market in the first half saw a rapid deceleration in the increase in employed persons, with the number of employed decreasing in May, accompanied by a decline in the employment rate and a rise in the unemployment rate,” and that “employment gains were concentrated in certain age groups and industries, resulting in a weaker trend than a year earlier.”

The institute projected an annual employment rate of 62.7% and an unemployment rate of 2.9% for this year. If this outlook materializes, the annual employment rate will decline for the first time in six years since 2020, the year of the COVID-19 crisis. Since 2000, simultaneous declines in the employment rate and increases in the unemployment rate have occurred only four times: in 2003, 2009, 2018, and 2020.

In the first half of this year, the number of employed persons increased by 108,000 from a year earlier. This falls short of half of the 220,000 that the institute projected at the end of last year, and is about half of the increase recorded a year earlier. By quarter, the number rose by 183,000 year over year in the first quarter and by 32,000 in the second quarter, with the pace of increase shrinking sharply. From April, employment gains weakened rapidly, and in May the number of employed fell by 40,000 year over year. ·

The employment rate followed a similar path. The employment rate for those aged 15 to 64 maintained an uptrend through the first quarter, but stopped rising in April and turned downward after May. In the first half, the employment rate was 62.5%, down 0.1 percentage point from a year earlier, while the unemployment rate was 3.2%, up 0.1 percentage point.

The institute stated, “This appears to be because most of the growth occurred in the semiconductor sector, which has little job creation, while growth in the domestic demand and non-semiconductor sectors, which largely determines employment, was weighed down by the burdens of high oil prices, high exchange rates, and high interest rates, as well as heightened external uncertainty.”

By age group, employment among people in their 40s and 50s was relatively firm, while it was weak among those in their 20s and early 60s. In particular, the employment rate for those in their 20s fell by 1.3 percentage points year over year, the steepest drop among all age groups.

Among young people (ages 15 to 29), the number of employed declined for 44 consecutive months through June, and the employment rate fell for 26 straight months. The institute stated, “In particular, job losses were concentrated in information and communications, professional and scientific services, and manufacturing, and among regular employees, weakening young people’s entry into ‘decent jobs.’”

The door to hiring young people also narrowed. The number of newly employed young workers with tenures of three months or less fell sharply from a year earlier, and the decline in the employment rate for new graduates was larger than the overall youth average. The institute noted, “This shows that the weakness in youth employment is particularly pronounced at the stage of entry into the labor market.”

By final educational attainment, the employment rate for people in their 20s with a high school diploma or less fell sharply, while the rates for those with junior college or higher degrees remained at the previous year level.

Among those aged 60 to 64, the number of employed decreased by 101,000 year over year, affected by a declining population as well as weakness in manufacturing, construction, and wholesale and retail trade.

The increase in regular employees also slowed noticeably. In the first half, the rise in regular employees plunged to about one third of the level a year earlier, and in May, it declined for the first time since December 1999. Moreover, the increase in regular employees in the first half was concentrated in health and social welfare services, and excluding this industry, regular employees actually fell by more than 50,000.

Temporary and daily workers decreased by nearly 60,000 in the first half, as weakness in domestic demand related industries was reflected earliest.

Non-wage workers such as the self-employed and unpaid family workers turned from decline to increase and accounted for two thirds of the rise in employed persons in the first half. This marks the first turn to increase since the COVID-19 crisis. However, the institute pointed out, “In wholesale and retail trade, which accounted for most of the increase in non-wage workers, wage and salary workers decreased and reports of self-employed business closures rose, so it is difficult to view this as a sign of a recovery in domestic demand conditions.”

Manufacturing saw the number of employed decline for 24 consecutive months, and construction also remained weak. Employment in services increased by 300,000, but most of the gains were concentrated in health and welfare, while professional, scientific, and technical services and wholesale and retail trade decreased.

The institute expects the limited employment effects of semiconductor-centered growth and the weakness in domestic demand and non-semiconductor sectors to continue in the second half. Accordingly, it forecasts that the number of employed in the second half will increase by only 98,000 year over year. It also revised down the projected average annual increase in employed persons for this year to 103,000. At the end of last year, the institute had projected a yearly increase of 210,000, but with the first-half results falling far short of expectations, it made a major revision.

The institute recommended, “It is urgent to stabilize the consumption base to prevent further contraction in employment and to prepare support measures for groups experiencing large employment shocks, such as young people and those in their early 60s.”