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Japan's resurgent outbreak overshadows nascent job recovery

New normal of working from home and dining in squeezes service providers

Japanese commuters crowd together at a station in Tokyo. (Photo by Akira Kodaka) 

TOKYO -- The resurgent coronavirus could derail a nascent recovery in Japan's jobs market, which in June displayed a surprising resilience.

The country's jobless rate dropped to 2.8% in June from 2.9% in May, according to data from the Statistics Bureau released on Friday, as businesses started calling back workers, including those who have been laid off or furloughed.

The data also shows that Japan's recovery is still a tentative one after the economy shed more than 1 million jobs in April when Japan was suffering through its first peak of coronavirus infections. From the beginning of the year through April, 1.15 million jobs were lost, with about a 10nth of the losses having been recovered by the end of June.

The question is whether the recovery still has legs.

Economists are not so optimistic, predicting a roadblock up ahead in the form of the virus's resurgence, which has recently forced businesses and local governments to restrict some activities.

"We expect the labor market condition to deteriorate further," said Ayako Fujita, an economist at JPMorgan Securities Japan. She expects the jobless rate to reach 3.3% by the end of the year.

"Economic activity will slow in July, which will hurt the jobs market," said Hiroshi Watanabe, senior economist at Sony Financial. "The slowdown is likely to extend into August."

The government of Prime Minister Shinzo Abe on July 14 asked businesses and labor unions to limit the number of workers commuting to their offices. Since then, the resurgence has grown more threatening. On Thursday, the number of new coronavirus cases in Japan surged to a record high of more than 1,300.

Tokyo Gov. Yuriko Koike issued an emergency alert the same day, asking pubs and karaoke bars to close by 10 p.m.

The restaurant and hotel industries have been the hardest hit by the pandemic, as the new normal of working from home, dining at home and vacationing at home takes root.

Businesses had responded to the coronavirus-induced recession by laying off temporary workers and furloughing others with financial support from government employment subsidies. The subsidy program is set to expire at the end of September. Sony Financial's Watanabe expects an extension to come up for discussion soon.

The U.S. economy has also been topsy-turvy. The nation's unemployment rate declined for two consecutive months -- to 13.3% in May and 11.1% in June. It had been 14.7% in April. But as new coronavirus cases surged in July, economic activity slowed again, with initial jobless claims rising for two straight weeks this month.

Elsewhere in Asia-Pacific countries, the June unemployment rate in South Korea fell to 4.3% from 4.5% the previous month but in Australia rose to 7.4% from 7.1%.

Back in Japan, separately released industrial production data in June rose 2.7% from May, the first month-on-month improvement in five months.

The index, however, had been down almost 20% so far this year, and a rebound was long overdue. The rebound in the industrial sector, including autos and electronics, also shows a bifurcating economy, one in which the IT sector is able to maintain its strength but the service sector -- those restaurants bars and hotels -- struggles.

Still, the employment situation is less severe in Japan than in other countries. This is partly due to a governmental employment protection program, but an evaporating labor pool and aging population are also playing roles.

In June, the ratio of job openings to applicants, a key measure of how plentiful positions are in the labor market, stood at 1.11, down from 1.2 the previous month, according to labor ministry data released on Friday.

This marked the worst reading since October 2014, though one that says there are still 111 jobs available for every 100 job seekers. Construction sites and delivery companies, among other industries, are especially short of hands.

The ratio, an early indicator of the job market, stood at 1.61 for all of 2018, its highest plateau in nearly half a century.

"Businesses are becoming more cautious about hiring," Sony Financial's Watanabe said, but "they are also cautious about laying off workers."

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