(Bloomberg) -- Japan's unemployment rate edged up in January as a record wave of Covid-19 infections prompted renewed restrictions that are likely to continue slowing progress in the recovery of the labor market in February and March.
The jobless rate rose to 2.8% as the number of people working fell by a seasonally adjusted 190,000 from December, the ministry of internal affairs reported Friday. Analysts had expected the unemployment rate to hold steady at 2.7%.
A separate report offered a slightly more encouraging view of the labor market as job offers outnumbered applicants by a greater margin, a leading indicator of the employment trend. There were 120 jobs offered in January for every 100 applicants, compared with 116 positions a month earlier.
The employment figures suggest that the surge in omicron cases and renewed restrictions in January triggered the loss of jobs, delivering a setback for a labor market that had been slowly healing.
Prime Minister Fumio Kishida's decision Thursday to extend the duration of semi-emergency virus restrictions in Tokyo and 17 other prefectures, will put further pressure on an economy that some analysts say will contract this quarter.
Read more: Japan to Extend Virus Curbs for Tokyo, Ease Border Restrictions
The uncertainties stemming from Russia's invasion of Ukraine and its impact on global trade, fuel prices and sentiment are also clouding the economy's prospects.
“While improvement in the labor market has stalled after quasi-emergency measures were taken due to the spread of omicron, the impact hasn't been that dramatic,” said Taro Saito, director of economic research at NLI Research Institute.
Daily infection numbers rocketed from around 500 at the beginning of January to around 100,000 a month later as the more infectious omicron variant spread quickly across the country.
Levels still remain elevated, prompting the need to keep the semi-state of emergency in place in some major cities. Bars and restaurants in those locations will be asked to close early for a few more weeks.
What Bloomberg Economics Says...
“Looking ahead, we expect labor conditions to weaken further in February due to the extension of virus curbs. Higher energy prices are increasing costs for businesses, many of which may delay new hiring until uncertainty related to the virus and the Ukraine war subside.”
-- Yuki Masujima, economist
To read the full report, click here.
Through government support and a corporate culture that doesn't quickly resort to layoffs, Japan has managed to avoid deep scarring to its labor market, with the jobless rate not far from its pre-pandemic level of 2.4% even after the January increase.
Still, the data show that Covid-19 has had an uneven effect on industries.
While more people are now employed in healthcare and specialist services compared with pre-pandemic levels in January 2019, there are around 400,000 fewer workers in the retail and wholesale sector and 350,000 fewer employed in bars, restaurants and hotels.
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