The unemployment rate fell to 4.0 percent in September from 4.2 percent in seasonally adjusted terms as the number of employed rose by 45,000 people from a year earlier, marking the biggest increase since June, a Statistics Korea report showed on Friday.
Analysts surveyed by Reuters expected unemployment would be in a range of 3.7 percent to 4.2 percent, with many forecasting a slow recovery in the job market due to ongoing restructuring in the manufacturing sector as well as President Moon Jae-in's controversial policies to sharply raise minimum wages.
The healthcare and social services sector saw jobs increasing by 133,000 in September from a year earlier, thanks to "the government's efforts to improve healthcare and add social workers in the sector," a Statistics Korea official said after the data was published.
The number of people with jobs increased by 137,000 in September from a year earlier, the report showed.
"We're seeing the data bottoming out, although we need to wait and see if the upturn (in job growth) will hold up," said Park Sang-hyun, an economist at Leading Investment & Securities in Seoul.
"It won't be easy to see fast job growth from the manufacturing sector as corporate investment isn't strong."
Friday's report showed manufacturers shed 42,000 jobs from a year earlier, while retailers cut another 100,000 jobs after similar declines in August.
The nation's finance ministry in a separate report said the job market is "still in grave situation," as manufacturing, and tourism sectors are still shedding jobs.
President Moon's support rating dropped to 49 percent in early September, a weekly Gallup Korea survey showed, the lowest since he took office in May 2017 as the worst unemployment figures since the global financial crisis sparked a strong public backlash.
The latest Gallup poll, however, showed a bounce in his popularity thanks to last month's third summit between Moon and North Korean leader Kim Jong Un which salvaged faltering nuclear talks between the North and the United States.
(Reporting by Cynthia Kim, Shin-hyung Lee, Hayoung Choi. Editing by Eric Meijer)