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Economy

Japan employment remains weak as service sector cuts back

Sept. job availability gauge deteriorates amid COVID uncertainty

Japan's central bank has called the country's employment and income situation "weak" despite improvements in exports and industrial production. (Photo by Akira Kodaka) 

TOKYO -- The jobless rate in Japan stood at 3.0% in September, unchanged from August, data from the Statistics Bureau showed on Friday, in the latest sign of an uneven recovery from the coronavirus crisis.

The September reading remains at the highest level since May 2017, when it stood at 3.1%, indicating that a manufacturing-led recovery in recent months has not been enough to reduce unemployment caused by the pandemic.

This poses a dilemma for Prime Minister Yoshihide Suga's new government. It is encouraging people to dine out and travel, but that is causing the number of infections to climb. Despite this, the travel subsidies may be extended beyond January. "The government has apparently judged that it makes more sense to boost the economy than to try to contain infections completely," said Junichi Makino, an economist at SMBC Nikko Securities.

The challenge was underlined by the Bank of Japan on Thursday. The central bank said in its quarterly outlook report that "the employment and income situation has been weak" despite improvements in exports and industrial production.

"The economy remains shrouded in a high degree of uncertainty, and has significant downside risks," warned Haruhiko Kuroda, governor of the central bank, on Thursday.

Recent corporate earnings also show a bifurcation in the economy with IT companies such as Sony and Nintendo have enjoyed handsome profits, yet airlines and restaurant chains reported big losses and job cuts.

Large companies in Japan tend to avoid laying off regular employees, opting instead to reduce the fixed costs through attrition, a hiring freeze or eliminating part-time jobs.

The jobs data showed an increase in employment for women and a decline for men in September. This indicates that subsidizing travel and dining out has had some effect in creating service jobs, SMBC Nikko's Makino said. But he believes other industries are cutting back on the number of workers they keep beyond retirement age.

The ratio of job openings to applicants, a leading indicator of the employment market, stood at 1.03 in September, compared with 1.04 in August, according to labor ministry data released the same day. This is the weakest reading since December 2013.

The reading of above 1 still indicates that more jobs are available than people seeking employment. Workers are in short supply in sectors such as supermarkets, nursing homes and delivery companies, even as the rest of the economy struggles with slow sales.

The government clearly wants to keep the gauge above 1, Makino said, but added that it is up to the private sector, not the government, whether or not to hire more.

Japan's chronic labor shortage lifted the ratio to 1.63 at one point last year, the highest in nearly half a century.

Jobs recovery is uneven in other countries, too. In the U.S., the unemployment rate fell for the fifth straight month to 7.9% in September. But the pace of job growth is slowing, and the decline in unemployment was due mainly to people leaving the workforce, economists at Moody's Analytics say.

In South Korea, the jobless rate rose for the first time in four months in September to 3.6%, after the government tightened social distancing rules following a fresh outbreak of virus cases in summer.

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