South Korea's jobless rate fell in March from a month earlier and job creation also picked up speed, raising expectations that labor market conditions might be rebounding from a slump, a government report showed Wednesday.

According to the report by Statistics Korea, the jobless rate stood at 3.5 percent last month, down from the previous month's 4 percent, the highest since February last year.

The jobless rate adjusted for inflation also declined to 3.2 percent last month from February's 3.5 percent.

Job creation accelerated, with the number of employed people standing at 24.5 million in March, up 249,000 from a year earlier.

The increase is higher than the 201,000 jobs added in February, the report showed.

The health and social welfare service sector added 147,000 jobs, leading the overall job creation last month, while the manufacturing sector created 123,000 works. The wholesale and retail sector, however, shed 89,000 jobs and the construction sector lost 51,000.

The latest job data comes as the country's economy is feared to fall into a prolonged low-growth phase amid worries that a continued slump in the labor market could drag on consumer spending and put the brakes on the overall economic recovery.

South Korea's gross domestic product grew less than 1 percent on-quarter for the seventh straight quarter, which is the longest-ever streak of such low growth rates. The economy grew 2 percent in 2012, the slowest gain in three years.

The government earlier said that it will draw up an extra budget designed to make up for the government's expected revenue shortfalls and expand fiscal capacity to bolster overall economic activities.

Though it did not unveil its size, the government seeks to have the extra budget proposal approved by the parliament within this month.

The extra budget plan will likely focus on creating more jobs, a move in line with major policy objectives being pushed by the Park Geun-hye government, which was inaugurated in late February.

The government aims to raise the country's employment rate to 70 percent by the end of its five-year term.

The rate especially among those aged 15-64 stood at 63.4 percent last month, the report showed.

Meanwhile, younger people continued to face challenges in landing jobs last month.

The unemployment rate for those aged 15-29 stayed at 8.6 percent in March, which is lower than the previous month's 9.1 percent but still higher than 8.3 percent tallied a year earlier, the report showed. (Yonhap News)