Friday, BNP Paribas released a report commenting on Japan's unemployment and household spending data for August and said that the better-than-expected results do not signal a trend reversal, but were rather a result of temporary effects.
Japan's seasonally adjusted unemployment rate surprisingly fell back to 5.5% in August from the record high 5.7% in the previous month, led by an increase in jobs. The recovery in employment conditions is mainly noticeable in the manufacturing sector, with jobs also created in agriculture and services, while job cuts slowed significantly in the construction sector.
However, the firm is of the opinion that a continuing recovery in employment is unlikely, and considers August's data as a "statistical blip". The recently released Tankan Survey results for the third quarter showed that more job cuts were expected in the coming months, especially in the manufacturing sector. The firm expects unemployment to peak at well over 6% in the coming quarters before easing.
August's household spending data also surprised on the upside, rebounding by a seasonally adjusted 1.9% on month after falling 1.3% in the previous month. The firm said that it is unclear whether the recovery in household spending will last, with the effects of the government's fiscal measures already fading.
The firm expects household consumption growth to lose momentum in the coming months against the backdrop of job losses and declining wages and expects it to bottom out by mid-2010 before it can stage a sustained recovery.
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