Japan’s Unemployment Rate Unexpectedly Falls to 5.1%

Nov. 27 (Bloomberg) -- Japan’s unemployment rate in October unexpectedly fell for a third month, a sign that the worst may be over for the labor market.

The jobless rate declined to 5.1 percent, the statistics bureau said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was 5.4 percent. The rate has been declining since reaching a postwar high of 5.7 percent in July.

More than 20 trillion yen ($230 billion) in stimulus spending helped the economy expand for a second quarter in the three months ended September. Even as the government steps up measures to support workers, today’s figures indicate that the growth spurred by exports and production is spreading through the world’s second-largest economy.

“Two months of improvements can’t tell you very much, but a third consecutive improvement paints a clear trend,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “The world economy is clearly recovering, which means we won’t see the kind of aggressive job cuts like before even if we still won’t see a lot of hiring either.”

Household spending rose 1.6 percent from a year ago, a separate report showed.

The job-to-applicant ratio, a leading indicator of employment trends, rose to 0.44, meaning there are only 44 positions for every 100 candidates, the Labor Ministry said today. The gauge plunged to a record low of 0.42 in July.

Government Pledge

The improvement in the labor market hasn’t convinced Prime Minister Yukio Hatoyama that jobs are secure. Deputy Prime Minister Naoto Kan said this week the government will ease conditions for employers to receive subsidies to keep people on their payrolls. The government has also pledged to create 100,000 jobs by March.

Younger people aren’t reaping the benefits of the improved labor market. The proportion of college students with job offers tumbled 7.4 percentage points from a year earlier to 62.4 percent, an Education Ministry report showed last week, the steepest drop since the survey started in 1996.

“The employment environment for new graduates is extremely severe,” the government said in the report.

Yusuke Ohta, a fourth-year economics major at Tokyo’s Sophia University, is one of these students without a job offer. He plans to stay at school for an extra year to be eligible for jobs for third-year students, because most companies extend offers to students a year before they graduate. A typical year at Sophia costs about 900,000 yen.

“Things weren’t supposed to end up this way,” the 22- year-old said. “I guess I have no choice but to keep enhancing my skills for when the economy gets better.”

To help students like Ohta, the government pledged to create 100,000 jobs by the fiscal year ending in March. Kan said this week the government will ease conditions for employers to receive subsidies to keep current workers employed.

Economist Azusa Kato, an economist at BNP Paribas says such emergency measures will help keep unemployment from soaring even as pressure to cut costs remain “extremely strong.” Companies including Sony Corp. have yet to return to profit.