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Economy in Brief

More Good News from Japan: Lower Unemployment, Higher CPI
by Carol Stone March 31, 2006

We've written about Japan frequently here the last few weeks, and candidly, we make no apology for appearing to be single-minded. Economists, practitioners of "the dismal science", rarely, it seems, have the opportunity to discuss genuinely pleasing developments. So on a day at the end of the Japanese fiscal year, when we can talk about sizable gains in employment, the largest one-month drop in the unemployment rate ever and continuing modest inflation in Japan, we're going to do it, even if it's just been a few days since we commented on rising land prices, another positive sign.

The labor force survey for February shows a 240,000 increase the number of people employed; this follows 270,000 in January, making more than half-a-million new workers since the beginning of calendar 2006. Employment in Japan has actually been ratcheting modestly higher since sometime in 2003, but these recent gains pick up the pace significantly. February's total, at 63.92 million workers, was up 0.8% from a year ago, nearly twice the relative increase for all of 2005. Moreover, the number of "employees" has increased more; people who work for companies are up 82,000 cumulatively in January and February and the number of people otherwise employed fell by 310,000 in the same two months to just barely over 9 million. When economies are weak, many people who are unable to find jobs elsewhere, start their own business or go to work in the family store. But as the economy strengthens, they can find more jobs at companies; this is happening in Japan and the percentage drop in the number of independent workers from a year ago was the steepest ever in January and February.

Another decline that was the biggest ever was that in the unemployment rate, 0.4%, from January to February. This was due, of course, to the increase in employment, but also to only a minimal increase in the total labor force. Even so, the labor force appears to be growing now, albeit modestly and irregularly. The slim 80,000 advance in 2005 was the first yearly increase since 1998. Renewed gains here are also a sign of a better outlook among workers; those unemployed were apparently withdrawing from the labor force, but now they are "available for work", perhaps with hopes raised that a job might be forthcoming.

Finally, we can't let the CPI go without brief mention. The increases remain quite small, but they are there nonetheless. The most widely watched line item is the "general index excluding fresh food". It has shown a year-to-year increase now for four months. Some of the rise is due to higher energy prices, but a new version of a core index excluding energy was also up in February, by 0.2% from a year earlier. Clothing, "miscellaneous" (including personal care), and housing costs are all rising.

  Feb 2006 Jan 2006 Dec 2005 Year Ago 2005 2004 2003
Employment (SA, mil) 63.92 63.68 63.41 63.43 63.56 63.29 63.16
Change (thous)/% Change +240 +270 -40 0.8 0.4 0.2 -0.2
Unemployment Rate (SA, %) 4.1 4.5 4.4 4.6 4.4 4.7 5.3
  Monthly Change -0.4 +0.1 -0.1 -- -- -- --
CPI: General(NSA,yr/yr %chg) 0.4 0.5 -0.1 -- -0.3 -0.0 -0.3
CPI: General ex Fresh Food (NSA, yr/yr % chg) 0.5 0.5 0.1 -- -0.1 -0.1 -0.3
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