South Korea's jobless rate falls

South Korea's jobless rate fell for the first time in nine months in July, data showed on Wednesday, lifting hopes for a steady economic recovery and triggering a sell off in bond futures. But analysts stopped short of predicting an early rate rise by the central bank, saying uncertainties in the domestic and global economies remained.
The seasonally adjusted unemployment rate eased to 3.8 percent in July from an eight-year peak of 4.0 percent in June, its first downturn since October 2008 but well above pre-crisis levels, data from the National Statistical Office showed. The level was also the lowest since April's 3.7 percent. "Job market conditions have improved but not enough to tempt complacency and call for a quick policy shift," said Park Sang-hyun, an economist at HI Investment & Securities.
Park said companies were still reluctant to hire new employees amid persistent weak domestic demand and a lack of confidence about a global economic recovery. The positive job market figures put a break on the debt market's rally driven by comments from the central bank governor on Tuesday that cooled expectations of an early policy tightening.
The September treasury bond futures contract, which had gained as much as 19 ticks earlier in the day, quickly pulled back to after the data to close at 109.20, down 6 ticks.
The Bank of Korea kept the benchmark rate unchanged at a record low 2.00 percent on Tuesday for a sixth month, saying that uncertainty lingered over the economy. The central bank governor said after the rate decision that the debt market had overpriced chances of an early rate increase and third-quarter data would be closely watched to determine the sustainability of economic recovery.
"The central bank may consider rate tightening by as early as the fourth quarter if the economy maintains a solid recovery pace well into the third quarter, but I think they would be very mindful of a hasty rate increase," Park said, adding the improvement in the job market would only be a gradual one.
Park said he still believed the Bank of Korea would begin to raise rates next year only after confirming a self-sustaining economic recovery. The data also showed the country lost 76,000 jobs in July over a year earlier, after gaining 4,000 jobs in June. From January to July, job losses totalled 131,000, heading for the first annual decline in the number of jobs since 2003.