Japan’s Jobless Rate Edges Up to a Three-Year High

(Bloomberg) -- Japan's unemployment rate ticked up to a three-year high in August as more people started to re-enter the labor market in search of work amid increasing economic activity.

The jobless rate rose to 3% from 2.9% in July, the internal affairs ministry reported Friday, the highest since May 2017. The overall result matched the median forecast from analysts. Despite a second monthly uptick in the unemployment rate, Japan has suffered far fewer job losses than other major economies during the crisis.

Still, with the mood very downbeat at the small businesses that employ most of Japan's workers, a solid recovery in hiring could be a long way off. The jobless data showed that more than half a million positions have been lost in the manufacturing sector since the previous year and more than a quarter of a million at hotels and restaurants.

Key Insights

• “Unemployment has stayed low largely thanks to government's big spending to protect jobs,” said economist Azusa Kato at BNP Paribas SA. “Companies are trying to keep jobs, but they aren't confident enough to hire more,” she said, adding that the unemployment rate could keep rising as more people return to the labor force to look for work.
• Legal precedents protecting full-time workers and big cash buffers on corporate balance sheets have helped prevent more layoffs, along with cheap loans and wage support from the government to keep workers on the payroll.
• A solid recovery for the economy and the labor market depends largely on the path of the pandemic. For Japan's export-reliant manufacturers, a resurgence of the virus in Europe and other key markets clouds the outlook. At home, bans on international tourists continue to weigh heavily on hotels and restaurants, where new job offers were down by 49% in August compared with last year.
• Friday's report showed job losses continued to be concentrated among part-time workers, whose numbers fell by 1.2 million positions in August compared with last year, dropping for a sixth straight month.

What Bloomberg's Economist Says

“Japan's August jobs data showed a slight slackening in the labor market but, fortunately, no clear signs that the deterioration could accelerate. The unemployment rate ticked up, partly reflecting an increase in people entering the job market to look for work. A rise in the number of people with jobs and a drop in those who are employed but not actually working point to a steadier labor market.”

--Yuki Masujima, economist

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• Manufacturing jobs fell by 520,000 from the prior year. There were 280,000 fewer positions at hotels and restaurants.
• A separate report showed the jobs-to-applicant ratio fell to 1.04 from 1.08 in July, meaning there were 104 jobs available for every 100 applicants. That's the lowest since January 2014.

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