Japanese payrolls posted their 39th straight rise on year in October amid persistent labor shortages in many sectors, leaving the seasonally adjusted unemployment rate to remain low and stable at 2.6%, unchanged from September. But wage growth hasn't caught up with sticky inflation, with real wages below year-earlier levels for the ninth straight month in September (October data due on Dec. 8) and dampening consumer spending.

Takeaway: The government needs to provide fiscal programs that would entice companies in many sectors to offer higher wages and better benefits to attract qualified workers while improving a social safety net. It is also essential to raise wages for the public sector, particularly in the medical, caregiving and daycare sectors where low wages and long working hours are making labor shortages worse.

Details:
Japan Oct s/a unemployment rate 2.6% (Sept 2.6%); median forecast 2.5% (range: 2.5% to 2.7%)

Japan Oct employment up 520,000 y/y at 68.65 million for 39th straight y/y gain (Sept +490,000)

Japan Oct unemployed up 130,000 y/y at 1.83 million (+110,000 in Sept at 1.84 million); third straight rise

Japan Oct employment y/y rise led by medical/welfare; big drops seen in farming, manufacturing, wholesale/retail also down

Japanese payrolls are expected to post their 39th straight rise on year in October amid persistent labor shortages in many sectors. The seasonally adjusted unemployment rate is forecast to remain low and stable, easing to 2.5% from 2.6% in September, when the number of the unemployed rose on year for the second straight month. A surge in job cuts and retirements pushed the rate up to 2.6% in August and hitting a more than five-year low of 2.3% in July.

The government continues to describe employment conditions as"showing signs of improvement” in its latest monthly economic report for November released Wednesday (unchanged since the last upgrade in June 2023) but wage growth lags behind sticky inflation around 3%. Real wages posted their ninth straight year-on-year drop in September, down 1.3%, after dipping 1.7% in August while total nominal wages rose at around the trend pace of 2.1% after rising 1.3% the prior month (base wage gains have been more stable at around 2.0%).

The Unemployment Rate measures the number of unemployed as a percentage of the labor force. The unemployment rate is part of the Labour Force Survey which also includes employment data.

The unemployment rate and employment change are carefully monitored. The employment data show the number employment along with the change in employment for the previous year. Monthly changes in employment also help clarify whether businesses are hiring. The unemployment rate is the percentage of the labor force that is unemployed. A lower jobless rate translates into more income earning workers and greater consumption. Increased spending is a positive for consumer oriented economic growth, something that has lagged in Japan.

By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events.