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Japan's low official jobless rate conceals deeper pain in its labor market

by Daniel Leussink

Reuters

The labor market in April appeared to be weathering a severe slowdown in economic activity due to the coronavirus pandemic, but a closer look at official data released Friday reveals a less rosy picture.

Japan’s jobless rate rose to 2.6 percent in April from 2.5 percent the previous month, a far cry from the 14.7 percent in the United States in April, a post-WWII record, and the 7.7 percent logged in the eurozone in March. But economists say the small rise in the official unemployment rate masks the full extent of the pain.

Analysts fear rises in the jobless rate could put the brakes on personal consumption and delay the recovery in the world’s third-largest economy, which slipped into recession in the first quarter.

Among those categorized as employed, those on furlough more than tripled to 4.2 million in April from the previous month. Although many furloughed workers will eventually return to their jobs, their inclusion in April’s unemployment figures would indicate a rate of 11.4 percent, Dai-ichi Life Research Institute said.

Friday’s data also showed the number of workers fell by a seasonally adjusted 1.07 million in April, the largest month-on-month drop since 1.13 million in January 1963, an Internal Affairs and Communications Ministry official said.

That compared with an increase of just 60,000 unemployed people in Friday’s data, which only includes those who were actively seeking work during the survey period, among other criteria.

Saddled with large workforces and excess capacity, Japanese companies laid off workers during the 2008-2009 global financial crisis and the crash of the tech bubble in the early 2000s.

Now many are facing pressure to reduce costs by cutting jobs as they struggle to deal with an unprecdented plunge in economic activity, especially in the service sector and at small and midsize firms.

The workers facing the brunt of those cuts are often thosae without job security — the part-timers, contract workers and temporary workers who account for 36.2 percent of the workforce.

Nonregular workers in fact posted the biggest year-on-year drop on record in April, the data showed.

Prime Minister Shinzo Abe’s government this week approved a second ¥117 trillion ($1.1 trillion) relief package partly to keep the labor market together and prevent a further rise in the jobless figure.

“The April jobless rate reached 2.6 percent,” Finance Minister Taro Aso told reporters after a Cabinet meeting on Friday. “There’s no doubt the impact of the coronavirus is playing out in economic activity. I think the numbers will deteriorate further in May.”

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