The unemployment rate fell to a 24-year low in November as companies were increasingly short on labor while frugal consumers stepped up spending more than expected, government data showed Tuesday in the latest indication that economy is strengthening.
Different data released at the same time showed core consumer prices rose for the 11th straight month, offering some relief to policymakers hoping that inflation will accelerate toward the Bank of Japan’s elusive 2 percent target. The gain, however, was largely driven by energy costs.
The latest batch of data confirms that the job market continued to tighten as the economy expanded for the seventh straight quarter in July-September. However, five years after Prime Minister Shinzo Abe returned to power with a pledge to pull the economy out of deflation, inflation remains stubbornly weak as economists point to lukewarm wage growth.
The jobless rate dropped to 2.7 percent from 2.8 percent in October, the lowest since November 1993, according to the Internal Affairs and Communications Ministry.
The jobs-to-applicants ratio improved further to 1.56 in November from 1.55 the previous month, the best level since January 1974, the Health, Labor and Welfare Ministry said. It means that there were 156 job openings for every 100 workers.
“The drop in the jobless rate came as a surprise,” said Toru Suehiro, senior market economist at Mizuho Securities Co., adding that Tuesday’s data supports the view the economy is in a modest expansion phase.
The number of unemployed fell 20,000, or a seasonally adjusted 1.1 percent, to 1.85 million.
After poor weather conditions hurt spending in October, particularly on travel, average household spending gained a real 1.7 percent from a year ago to ¥277,361 as expenditures on durable goods and dining out increased.
The internal affairs ministry maintained its assessment that household spending — a key indicator of private consumption that accounts for nearly 60 percent of the economy — is recovering.
In recent quarters, economic growth has been largely driven by exports while domestic demand still lacks strength.
The core consumer price index, excluding fresh food prices because of their volatility, rose 0.9 percent from a year ago, the fastest pace since March 2015, following a 0.8 percent increase in October, the internal affairs ministry said.
Excluding energy and fresh foods, so-called core-core consumer prices rose just 0.3 percent from the previous year, highlighting slow inflation.
Most of the recent uptick in the core CPI has been attributed to rising energy prices and many economists forecast that the momentum will weaken next year.
“Wages have been rising only at a moderate pace, so unless we see more robust growth, it would be difficult to expect both inflation and spending to pick up pace further and further,” Suehiro said.
For the current fiscal year through March, the Cabinet Office estimates core consumer prices will rise a modest 0.7 percent despite its recent assessment that Japan has entered a “new phase” in beating deflation.
The core CPI for Tokyo’s 23 wards, which is released a month before nationwide data and is seen as a bellwether of wider price moves, was up 0.8 percent in December from a year earlier.