Japan posted several changes in labor-related indicators in January 2016. Labor force grew 0.8% m/m in the month, whereas the total number of employed people also grew 1% m/m. This suggests that several workers that quit labor force rejoined and were able to find jobs. Japan’s jobless rate is likely to remain same at January’s level of 3.2%, according to Societe Generale.
Firms with shortage of labor recruited strongly, increasing the number of employees in January 2016 to the highest since February 2001. Meanwhile, the number of new job seekers in January fell sharply by 9.1% m/m, showing that there is a smaller effect of corporate restructuring and bankruptcy.
Wage growth is quickening with the support of improvement in working conditions. Hence, several workers are looking for better working conditions, possibly causing the volatility in the jobless rate.
“The jobs-to-applicant ratio is likely to have edged up to 1.29 in February from 1.28 in January, which would be the highest level since December 1991”, says Societe Generale.
Japan’s jobless rate has continued to be below 3.5% for some time, while labor supply and demand has tightened. Companies are beginning to increase hiring of fulltime regular employees. According to Societe Generale, a larger number of employees are likely to be hired from April 2016.
“Thus, we expect the unemployment rate to fall below 3.0% by the end of 2016”, says Societe Generale.
Aggregate wage growth is increasing rapidly at about 1.5% y/y even though the average wage growth seems moderate. For Japan to exit deflation entirely, aggregate wages will have to grow over 2% y/y. However, the pace of growth at present has halted. The average wage growth during the 2016 spring annual wage talks continued to be at about 2.1% y/y, below 2015’s 2.5% y/y. The aggregate wage growth seems to slow, while the jobless rate continues to drop.
According to Societe Generale, the companies are likely to begin increasing investment as the uncertainty in the global market drops. This will result in growth of net domestic fund demand. The jobless rate is likely to decline further and aggregate wage growth is also expected to accelerate further in H2 FY2016.
