TOKYO - Japan’s jobless rate unexpectedly fell in August while household spending rose, but economists said it was unclear if these positive moves could be sustained as the effect of government stimulus spending fades.
Economists said it would take time for the job market to fully recover from sharp job losses over the past few months, while the outlook for domestic consumption remains uncertain.
“The unemployment rate fell earlier than expected, but we don’t know yet whether it is just a dip for one month or something more continuous,” said Masamichi Adachi, senior economist at JPMorgan Securities.
The jobless rate fell unexpectedly to 5.5 per cent in August from a record high of 5.7 per cent in July, despite economists’ median forecast for a further rise to 5.8 per cent.
Japan’s unemployment rate had been steadily rising as the recovery in exports and industrial output has been slow to spread to the rest of the economy.
The jobless rate fell as the healthcare industry added workers and job losses in the construction and services industries slowed. But the data also showed that job losses at manufacturers picked up pace and the overall number of unemployed rose to 3.61m people, the highest in six years.
Job availability also remained at a record low.
The jobs-to-applicants ratio was 0.42 in August, meaning only about four jobs were available for every 10 applicants. That matched the median estimate and was unchanged from last month, which was the lowest reading since the data began in 1963.
“The job market will remain bleak in the coming months given that the Bank of Japan’s Tankan survey showed many firms are still saddled with excess workers and that exports and industrial output may lose momentum from later this year as the effects of stimulus fade,” said Hiroshi Watanabe, economist at Daiwa Institute of Research.
Household spending rose 2.6 per cent in August from a year earlier, in contrast to a median market forecast for a 0.2 per cent decline.
The gain in household spending was the highest since January last year in real terms as it was exaggerated after adjustments to reflect record declines in consumer prices, a government official said at a briefing. In nominal terms, spending fell 0.1 per cent from a year ago.
Japan’s personal consumption got a mild boost due to subsidies offered on energy-efficient cars and electronics, but economists fret that consumption will stagnate as the impact of the subsidies fades. Falling wages and rising unemployment will also hamper consumer spending.
“Household spending came out surprisingly strong thanks largely to government subsidies for purchases of energy-efficient cars and household appliances, but I doubt the momentum will last long because wage earner incomes are sliding,” said Watanabe at Daiwa Institute.
Hatoyama’s government has set Friday as a deadline for cabinet ministers to cut wasteful projects from a supplementary budget compiled by his predecessor. The government has said it needs Y7,100bn ($79bn) in the first year to fund policies to try to boost domestic demand by increasing household incomes.
Japan’s economy pulled out of recession in the second quarter but analysts are cautious on the outlook as falling wages and rising jobless hurt already-weak domestic demand.
