By Yoon Ja-young



Rising inflation and unemployment have pulled up the economic misery index to its highest level in five years.



According to Statistics Korea, the country's unemployment rate stood at 4.3 percent in the first quarter while consumer prices rose 2.1 percent. This means the economic misery index, which adds inflation to the unemployment rate, stands at 6.4, the highest level since the first quarter of 2012 when it marked 6.8. The economic misery index is used to estimate the economic hardship of households.



The index once soared to 8.6 in the third quarter of 2008 when the global financial crisis hit the country.



The figure, however, had been falling thanks to stable price levels. As inflation moves between 1 percent and 2 percent, the economic misery index fell to 4.6 in the third quarter of 2012 and to 3.9 in the fourth quarter of 2013.



As both inflation and unemployment started to rise recently, however, the misery index began to soar. Consumer prices rose 2.1 percent in the first quarter, up 1.2 percentage point from the previous year. As global oil prices have started to rebound, the prices of oil products have risen 12 percent. Prices of poultry products have also jumped 8.6 percent following the outbreak of avian influenza while agricultural products saw a 4.7 percent rise.



The jobless rate stood at 4.3 percent in the first quarter of this year, which is the highest level since 2010. The unemployment rate of young people between the ages of 15 and 29 recorded 10.8 percent.



The economic misery index is expected to rise further this year since both inflation and job market conditions are likely to worsen.



"The economy is likely to shift to an era of low growth and high inflation from years of low growth and low inflation," said Kim Cheon-ku, a research fellow at the Hyundai Research Institute.



While inflation pressure from the demand side is still low, he expects pressures to increase on external factors such as the rising won/dollar rate and inflation in other major countries.



He added that one cannot exclude stagflation in that case.



"It will accelerate a slowdown in both consumption and investment, negatively affecting consumer sentiment," he said. "There will also be limitations in monetary policy as both a key rate hike and cut will be difficult."



The Korea Development Institute (KDI) also estimates consumer prices to rise 1.8 percent this year, which compares with a 1 percent rise last year.



It expects the jobless rate to record 3.8 percent, 0.1 percentage point higher than last year.



The number of jobless people with college diplomas surpassed 500,000 for the first time in the first quarter, and economically inactive people with college diplomas also surpassed 3.5 million.



