Japan: why unemployment fell during recession?

One simple fact: more people became discouraged, and gave up searching.

source: WSJ

Japan's Nasty Employment Surprise

Surely the only thing worse than looking for employment and not being able to find it is giving up the search altogether.

Discouraged workers are pulling out of Japan's labor pool. That led the nation's unemployment rate to drop to 4.1% from December's revised 4.3%. Economists -- expecting the unemployment rate to rise to 4.6% -- didn't quite anticipate this.

It's not difficult to see why job seekers are so discouraged. In January, there were only 67 positions for every 100 job seekers, according to the government -- the weakest labor demand since September 2003. Compare that with 85 just six months ago.

There's more bad news ahead.

Companies are trying to maintain positions by cutting work hours and furloughing staff. These are measures that'll only last so long. In a separate report Friday, Japan said industrial production plunged 10% in January -- a record drop which doesn't bode well for employment in months ahead.

Recently the hit has been most severe in Japan's export-oriented manufacturing centers. The home of Toyota Motor, Aichi prefecture, saw the number of jobs available plunge by 20%, the sharpest drop in the country.

So Japan is now fighting a war on two fronts. Consumers account for 55% of the nation's gross-domestic product and there's little encouraging them to spend.

Tokyo can't do much about exports, but even on the domestic front it's offered few solutions. A planned $120 cash handout has been widely panned, and a potentially massive stimulus package -- totaling up to $300 billion -- could be delayed by politics.

Japan's leaders need to stop worrying about their own jobs and act.