South Korea sees biggest job losses in 5 years; rate cut seen

The number of employed people fell by 103,000 to 22.86 million in January compared with a year earlier, the National Statistical Office said on Wednesday, marking the biggest loss since September 2003 in the aftermath of a burst credit bubble.

Analysts said the latest in a series of indicators showing Asia's fourth-largest economy slipping deeper into its first recession in 11 years would increase the case for further action from policy makers.

A newspaper reported that South Korean authorities would unveil new stimulus policies as early as Thursday, including expanding credit guarantees for small firms by state-run agencies by about 50 trillion won (US$35.9 billion).

The central bank is expected to cut interest rates on Thursday for the sixth straight time in just four months to stave off a crisis that began in the United States before sweeping worldwide.

“We will see more of a downward spiral in the economic slump and job losses, with exports collapsing and domestic demand flagging,” said Lee Sang-jae, an economist at Hyundai Securities. “The bleak economic and job market outlook should push the central bank for more rate cuts.”

March treasury bond futures extended gains and Seoul stock market's pared losses as the bleak economic outlook boosted the case for more rate cuts and fresh stimulus measures.

New Finance Minister Yoon Jeung-hyun said on Tuesday that the economy would shrink by 2 percent this year, the first contraction since 1998.

It was the first admission by the government of a possible contraction in an economy that relies heavily on demand from countries now in recession, such as the United States and Europe.

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