Japan’s Unemployment Rate Holds at Two-Decade Low in April

• Japan’s Unemployment Rate Holds at Two-Decade Low in April

Japan’s jobless rate remained at the lowest in more than two decades last month, and retail sales rose from March, climbing for a fourth month.

Highlights of Data

• Retail sales rose 1.4 percent from March, and were up 3.2 percent compared to April last year.
• The unemployment rate for April was 2.8 percent, the same as the forecast.
• Household spending fell 1.4 percent in April from a year ago (forecast -0.9 percent), following a 1.3 percent decline in March.

Key Takeaways

Private demand rebounded during the first three months of the year as Japan’s economy expanded for a fifth consecutive quarter, its longest run of growth in a decade. But households have struggled, with workers receiving limited pay increases despite the tight labor market. With private consumption accounting for almost 60 percent of the economy, wages and consumer spending will need to gain traction before Japan’s recovery becomes self-sustaining.

Economist Views

• “Improving labor conditions are supporting consumption,” which is stronger than expected, according to Masaki Kuwahara, senior economist at Nomura Securities Co.
• “Strong gains in retail sales and ‘core’ household spending in April suggest that private consumption is on track for another solid increase in the second quarter,” according to Capital Economics’ Marcel Thieliant. “Employment growth remains very strong and the labor market is the tightest it has been in at least two decades.”
• Thieliant expects the unemployment rate to fall a bit more in coming months.
• “Japan has a quite serious labor shortage, but it’s more structural rather than purely demand driven,” according to former Bank of Japan board member Sayuri Shirai, speaking on Bloomberg Television. “Since 2010, when you look at the number of job applicants, it’s dropping significantly.”
• Real consumption has been more-or-less stagnant since 2012 because there’s been no increase in real wages, Shirai said.

Other Details

• The job-to-applicant ratio was 1.48 (forecast 1.46). That was the highest since the mid-1970s.