Japan slides deeper into recession
Bloomberg News
TOKYO — Japan's unemployment rate rose to a record 4.9 percent in May as manufacturers and constructors, two of the nation's biggest employers, laid off workers. The jobless rate may climb further as the economy slides into recession, analysts said.
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The world's second-biggest economy shed 210,000 jobs last month, government figures show-ed. Industrial production fell to a two-year low in May and jobs are fast disappearing as companies shutter factories and slow assembly lines.
More and more people in Japan are searching for work at computerized unemployment centers such as this one in Tokyo. Japan's unemployment rate in May climbed to a record 4.9 percent as businesses shed 210,000 jobs.
People are also spending less as unemployment rises. Salaried-worker spending rose just 0.1 percent in May. Economists had expected a 1.1 percent increase after two months of declines.
"Production has fallen quite a lot since the beginning of the year, and that's translated to rising joblessness," said Susumu Okano, chief economist at Daiwa Institute of Research Ltd. "Consumer spending is weaker compared to the first quarter."
Economy Minister Heizo Takenaka has warned government plans to force major banks to write off about 13 trillion yen ($104 billion) in bad loans will cost between 100,000 to 200,000 jobs as insolvent companies are closed down.
On top of that, the government plans to cap spending on public works such as highways and dams, cutting off a line of support to the construction industry, which employs one-in-10 Japanese workers.
Manufacturing companies — which account for about one-fifth of all jobs — shed 230,000 workers last month, while construction companies cut 120,000 jobs. That was partly offset by an increase in work in transportation, telecommunications and retailing.
The May jobless rate matches the record set in December and January.
The reports extend a run of indicators suggesting Japan may stay in recession for the rest of the year. The economy shrank 0.2 percent in the first quarter, and will probably contract by a similar amount this quarter and next, according to the latest Bloomberg News survey.
"We're already in recession and it's still falling toward the bottom," said Yukari Sato, a senior economist at Nikko Salomon Smith Barney Ltd.
In May, industrial production posted a bigger-than-expected 1.2 percent decline, while export volumes dropped to the lowest level in at least 35 years.
As companies trim production, workers get fewer overtime shifts, eating into paychecks. Incomes fell 1.3 percent last month from April, seasonally adjusted, and are down 2.1 percent from a year ago, the sixth straight decline. The propensity-to-spend ratio, which rises when people save less, rose to 70.6 percent from 69.1 percent.
In May, people spent less on clothes, food, transportation and telecommunications. The decline was partly offset by an increase in home repairs and education.
