Economy

Consumer Spending In Japan May Be Buoyed By Labor Demand

Tight labor conditions in Japan may give a boost to consumer spending in Japan, Reuters reported.

The demand for workers in the country is at a 40 year high, which comes amid a 20 year low in unemployment as measured by April’s data.  The numbers imply that consumer spending might see a turnaround, increasing from relatively weak showings as of late.

The labor market measure, known as the jobs to applicants ratio, was 1.48 percent in April, and that is up from 1.45 in March. The ratio, explained the newswire, shows that 1.48 vacancies exist for each individual seeking employment. The implication is that there is a shortage of workers alongside demand that is tied to a pickup in business, across construction and other industries.   The ratio has not been this strong since 1974, when at its previous peak the reading was 1.53.  Tight labor markets have the general impact of boosting wages (in order to attract workers) and this leads to inflation. The Bank of Japan has said that its price growth expectations are at two percent through the next fiscal year.

As for unemployment, the unemployment was unchanged month on month at 2.8 percent, which means this is the lowest reading in 23 years.

One roadblock to those growth rates may be come in the form of companies that are cutting hours and thus have not (and may not need to) boost wages.

Against this backdrop, household spending remains weak at least as a headline number, and fell 1.4 percent in April from last year.  That number is worse than the 0.7 percent year on year decline. The slip, however, is not adjusted for spending on automobiles or housing, and excluding those categories, shows an actual increase of 3.5 percent in April.  Some economists surveyed by Reuters relayed expectations that as hiring increases, consumer spending should, as well.

 

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