Yellow on this chart is the unemployment rate. The jaggedy line is the LFPR, with the 12m moving average shown by the purple line. Would you like more?
Hmm, doesn't look so good after all. Japan's Hidden Unemployment Problem By SeekingAlpha, September 26, 2014, 04:07:56 PM EDT By Alpha Now at Thomson Reuters : By Philip Lachowycz Basic pay is at last rising in Japan, but only in cash terms. After adjusting for inflation, real wages are falling rapidly. If Abenomics is to succeed, the household sector must play a part in the recovery. At a minimum, that requires that increases in wages more than keep pace with increases in prices. In Japan, the ratio of job openings to applicants now stands at 1.10. It is not only above its pre-crisis peak of 1.07, it is at its highest level in more than 20 years. The Bank of Japan hopes that a tighter labour market will put upward pressure on wages, encouraging more consumption. In this week's News in Charts, we dig a little deeper into the Japanese labour market and find a considerable amount of hidden unemployment. Since the late 1990s, when it became clear that the Japanese economy was in crisis, the Japanese labour market has undergone a significant degree of structural change that is not readily apparent in headline indicators, such as the unemployment rate. Employers are increasingly looking to offer only part-time work, to a labour force that still yearns for the security and the income offered by a full-time job. That means that the jobs on offer are less well suited to those looking for work than they used to be. In the economics jargon, the degree of mismatch in the Japanese labour market has risen, and upward pressure on wages is less than indicators such as the ratio of job openings to applicants might suggest. Japan's ageing population means the supply of labour is falling … Japan's demographic problems are well recognised. From the mid-1990s, the dependency ratio - the number of people under 15 or over 64 as a proportion of the number of people between 15 and 64 - has risen sharply. With older age groups less likely to look for work, the consequence is a dramatic fall in the participation rate - and by extension a dramatic fall in labour supply. As our chart shows, the bulk of the fall in participation since the mid-1990s is a consequence of the ageing population. But Japan is not the only country that has an ageing population. US participation started to turn around 2000 as the post-war Baby Boomers began to move into retirement. Most of the decline in US participation in recent years is also a consequence of demographics. Looking across countries, Japan's participation rate hardly looks extreme. Its participation rate is close to that of Germany, and higher than that of the euro area as a whole. ...but the demand for labour is falling faster Average hours worked in Japan have been on a downward trend since at least the 1970s. This is a common feature of developed economies. As people become better off, they chose to work fewer hours. Nevertheless, there is a cyclical as well as a structural element to average hours, and the leveling off of average hours over the past two to three years hardly suggests a labour market that is in danger of overheating. A shift towards part-time working accounts for a good part of the decline in average hours beyond the late 1990s. Contrary to common perception, nearly 40% of Japan's workforce is now employed part-time. The protected 'job-for-life' culture, by which graduates used to enter companies and stay there for the rest of their careers, is not the current ethos. The chart below shows that the share of part-time workers in total workers has more than doubled over the past 30 years. And this is not purely a consequence of increased female participation. Women are more likely to work part-time, yes, but the proportion of males that are working part-time has more than doubled since the late 1990s. According to an occasional survey undertaken by Japan's Ministry of Health, Labour and Welfare, much of the rise in part-time employment has been involuntary. The survey finds that the proportion of part-time workers who would rather work full-time has more than doubled since the late 1990s, from around one in ten to almost one in five. As the chart below shows, the number of part-time workers in Japan who would rather work full-time - the so-called 'underemployed' - exceeds the number of unemployed people by almost 50%. In that regard, Japan's underemployment problem might be considered larger than that of either the US or the UK. A mismatched labour market Japan's rising underemployment problem is mirrored in an increase in labour market mismatch. Changes in the efficiency with which unemployed workers are able to match with vacancies is often assessed using a simple scatter plot of the unemployment rate against the unfilled vacancy rate - known as the 'Beveridge Curve'. The sample in our chart is divided into two periods. The orange dots represent the period before the depths of Japan's economic crisis in the late 1990s. The blue dots reflect the post-crisis period. Since the crisis hit, there has been a notable rightward shift in the Beveridge Curve. At any unemployment rate, the level of vacancies associated with a given degree of wage pressure will tend to be higher because the jobs on offer are less well suited to the pool of unemployed workers. The degree of mismatch in the Japanese labour market, with an excess supply of part-time jobs, and an excess demand for full-time jobs, resulting in a significant degree of underemployment, is evident in wage rates. For the past 15 years, hourly wages offered for part-time work have been rising, while hourly wages offered for full-time work have been on a clear downward trend. Conclusions The BoJ believes that the labour market is tight enough to bring about a sustained increase in real wages. In our view it is not - at least not yet. The existence of a significant amount of underemployment means that Japan's labour market is less tight than it might at first appear. Since the depths of Japan's economic crisis back in the late 1990s, there has been a move away from the old 'job-for-life' culture, to one where the focus is on more part-time and temporary employment. A meaningful pick-up in wage growth is likely to be preceded by a switch from part-time into full-time employment. There are signs that this is happening in some industries, such as catering and construction, where there are severe labour shortages. But for now it is the exception, rather than the norm. The trend towards more part-time work that has been in place since the late 1990s remains. Real wages continue to fall sharply. And if next year's planned increase in the rate of VAT from 8% to 10% goes ahead, this will only add to the woes of Japan's struggling household sector.
These are the charts of the actual numbers: Yellow is the unemployed in the labor force, white is the employed in the labor force (both in tens of thousand, sa). As to the argument about the hours worked, I do see the secular slowdown that's been in place from the 1970s. However, I see little change in it in the past 5 years and very little in the past couple. Happy to attach a chart on that... From what I can see, same applies to the part-timers...
No other industrialized nation has a larger part-time employment share off labor markets than Japan. Awesome unemployment stats. It is not hidden it is just a fact. Nobody knows when markets will reflect the degrading fundamentals in Japan but the time of reckoning will come. The writing is on the wall and there is no escape, given the Japanese cultural stubbornness. I have zero doubt about the fact that the Japanese soul needs to hit the head against the brick wall before making a shift in thought process. Nowhere else in the world can major nations destroy billions of trade value over some small worthless island archipelagos while refusing to sit on the same table to talk things out than in Asia. There is little denying that a small prick needs a compensating big ego. Until this ego is broken Japanese policies will not change. I am certain that anyone who has lived or devoted a considerable time to Japan and its culture will agree.
I am certain you will not convince Martinghoul. For whatever reason he is married to the thought that Japan is a steal, maybe he is heavily invested in Japanese politics via real estate investments or otherwise, who knows. But he does not even understand the degree of destruction the massive surge in part-time employment and outphasing of full time job has done to the average worker and his family in Japan. How could he? By his own admission has he never been in Japan or lived in Japan, he is reading Reuters and Bloomberg news in London.
The Unemployment rate is exactly where it was pre-2008: so are wages: while government debt is spiraling out of control: Please explain to us where the money is going if not ending up in peoples' pockets? How are they gonna pay for rising sales taxes and higher cost of all consumables? Oh wages will increase as well if inflation will ever pick up? How so? Competition from China and rest of Asia is fierce. Japan is not a locked-up country anymore it was before. Cars are not assembled in Nagoya anymore but Thailand or elsewhere while most parts are manufactured in China. Please explain how jobs can remain competitive in Japan while wages increase. And if you do not believe wages increase then how are people gonna pay for rising costs of living? Heck, please explain one single silver lining because we aside you just do not see it.
I find that sad. Not just his line of thought, but any line of thought that believes external forces have the energy to hold things together. In the end it comes down to simple factors which most economists utterly ignore: An environment where companies can lay a degree of trust into the stability of politics in order to plan ahead; an environment where workers feel that their income and jobs are somewhat secure which enables them to plan for the future, including offspring; an environment where a large portion of the employable citizens are eager and willing to actually seek jobs and work; and environment where consumers spend money because they feel secure about the future and believe they do not need to hold on to every penny. Most comes down to market psychology. "How do we feel about the future" is probably one of the most important questions politicians and decision makers should concern themselves with. Every other patch-up is just a temporary and very costly solution.