The Bank of Korea published an issue note arguing that private employment, defined as total employment excluding public employment, provides a clearer read on underlying labor market and macroeconomic conditions than aggregate employment alone. The note says the steady rise in public employment has reduced the usefulness of total employment as a cyclical indicator, while private employment tracks domestic demand, core inflation and broader labor market conditions more closely. Using this measure, the bank assessed Korea's labor market as having remained subdued since 2024, with some easing of weakness in the third quarter of 2025 as consumption recovered. Public employment, defined in the note as senior employment programs plus public administration workers not already captured in those programs, rose from a monthly average of 1.13 million in 2015 to 2.08 million in the first three quarters of 2025, lifting its share of total employment from 4.3 percent to 7.2 percent. The bank estimates that private employment fell below trend from 2024 amid weakness in construction and stayed soft through the first half of 2025, even as public employment supported headline job growth and lowered the unemployment rate by about 0.1 to 0.2 percentage points under the paper's scenarios. The note projects private employment growth to edge up from 50,000 in 2025 to 60,000 in 2026 as domestic demand strengthens, with the private employment gap narrowing sharply from minus 80,000 to minus 20,000 and turning positive in 2027. It also finds that forecasts based on private employment outperform those based on total employment for growth and inflation, with materially lower forecast errors for domestic demand and modestly lower errors for core inflation.

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