Labor Shortage Shows Japan Economy Improving

Japanese companies continue to face severe labor shortages, with job availability improving further in June to the tightest level in over four decades while the unemployment rate declined, government data showed Friday.

The seasonally adjusted job availability rate improved to 1.51 from 1.49 in May, marking the highest level since February 1974, according to the Japan Ministry of Health, Labor and Welfare. The rate indicates that 151 positions were available for every 100 job seekers, Kyodo reported.

In a fresh sign that labor is in short supply, the seasonally adjusted job-to-applicant ratio for regular workers stood at 1.01, rising above 1 for the first time since comparable data became available in 2004 and suggesting potential for future wage growth.

The jobless rate, meanwhile, fell to 2.8% in June from 3.1% the previous month, the ministry of internal affairs and communications said Friday.

Separate data also released Friday showed consumption is gradually picking up. Household spending marked the first year-on-year gain in 16 months, rising 2.3% to ¥268,802 ($2,420) in June, according to the ministry.

These data provided more evidence that the economy remains on a moderate recovery path. But the labor shortage could become a bottleneck to economic growth as the aging of its population continues.

“The labor market has already tightened to a considerable degree and if the economy continues to recover, it will become more difficult to cope with the labor shortage,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

The number of new job offers rose in sectors such as manufacturing, transportation and construction. The unemployment rate for men fell 0.3 point to 2.9% while that for women shrank 0.2 point to 2.7%, the labor ministry said.

The number of unemployed people dropped a seasonally adjusted 7.8% from the previous month to 1.89 million, while Japan had 65.31 million workers in June, up 0.2%.

In June, the average income of salaried households with two or more people rose 0.1% from a year ago to ¥735,477 for the first gain in four months. Anemic wage growth despite tightness in the labor market has been a drag on private consumption, which accounts for nearly 60% of gross domestic product.

“The weakness we saw in consumption was somewhat unexpected” and future data need to be examined carefully, an internal affairs ministry official said. While spending on housing, education, and transportation and communication services also increased, expenditure on food items fell mainly because poor catches led to higher prices of some seafood items.