Published monthly by the Ministry of Health, Labour and Welfare. Updated to the month of November 2016 (published on December 27th, 2016).
Recent data trend:
The demand/supply balance in the Japanese labor market remains tight. The unemployment rate rose slightly in November to 3.1%, up from 3.0% in October. The 0.1% point rise should not be a cause of a concern. Other labor market indicators such as new job offers to applicant ratio show that the demand supply balance remains tight. Job offers to applicant ratio rose from 1.40 in October to 1.41 in November. New job offers to applicant ratio remained unchanged in November at 2.11.
While there is no question that the Japanese labor market is tight, we are hesitant to describe the situation as robust though. It is because the tightness in the labor market is caused as much by the shrinkage in the Japanese working population as from the rise in the demand for labor in Japan. The working age population in Japan, defined as the population of the age between 15 and 64, has been shrinking rapidly. In 2015, the work age population in Japan fell by as much as 1.1 million people. In 2016, the shrinkage will be 0.8 million people. Accordingly, job applicants have been declining by 5 to 6% per year in the last few years.
Will the tightening in the labor market lead to higher wage inflation? That is the big question hanging in the air for the past few years. The BoJ governor Kuroda certainly hopes so, and he has been telling us that all we need is patience. While we agree that a tightening in the labor market should eventually lead to wage inflation, it is taking awfully long time in Japan. In our view, the chances are that a negative economic shock would arrive before the wage inflation pressure comes to fruition in Japan.
This statistics is one of the best indicators to monitor the demand/supply balance in the Japanese labor market. The data comes from Public Employment Security Office. Job referral has been highly regulated in Japan and the Office still plays a dominant role in job referral. For example, job seekers are required to register at the Office to be eligible for unemployment benefits. Aside from the main indicator, job offers to applicant ratio, the growth rate of new job offers is also considered as an important leading indicator for the labor market in Japan. Historically, we can observe an upward wage pressure to arise when the job offers to applicant ratio exceeds one. The job offers to applicant ratio has been consistently below 1 since 1993 except for a brief period between 2006-2007.
Full-time vs Part-time workers
Levels of new job offers and new job applicants
YoY% change in job offers
Source: MHLW, JMA.
The Next Release Date: January 31st, 2017.