Labour Market (Aug.)

Unemployment to rise to 2.5% by year-end The continued tightness of the labour market is reducing the pressure on the Bank of Japan to provide additional stimulus but we expect unemployment to rise over the coming months. Both the labour force and the number of employed people rose by 0.3% in August, so the unemployment rate was unchanged at 2.2%. That result was in line with the Bloomberg median. Annual employment growth slowed slightly from 1.1% to 1.0% while growth in the labour force held steady at 0.8%. Given that the working-age population dropped by 0.5% y/y, those are still strong figures. Looking ahead though, employment surveys point to annual employment growth slowing to 0.5% by early next year. The labour force will probably slow as well but probably not enough to prevent unemployment from rising. And while the jobs-to-applicants ratio held steady at 1.59 following three consecutive monthly falls, it suggests the unemployment rate will creep higher over the coming months. Our forecast is that the jobless rate will climb to 2.5% by the end of the year. Marcel Thieliant Senior Japan Economist +65 6595 1514 marcel.thieliant@capitaleconomics.com