Unemployment down, job offers per applicant down, and a record number of people employed by temp staffing agencies

December 29, 2007
By Ken Worsley

After increasing for two straight months and then holding steady in October, Japan’s unemployment rate dropped 0.2% to hit 3.8% in November. Data released yesterday by the Ministry of Internal Affairs and Communications also showed that in November, the number of people employed in Japan stood at 64.33 million, which was an increase of 0.4% from the previous year. On the other hand, November’s figure of 2.46 million unemployed people was down by 5.0% from last year.

Perhaps more interestingly, we see in this month’s Labor Force Survey from the Ministry of Health, Labor and Welfare that the ratio of job offers to job seekers has sunk to a two year low. In November, the ratio was at 0.99, down from 1.02 in October.

We have been slowly watching this ratio slide and a while ago predicted that it would go below 1.0 before the beginning of 2008. We had not seen less than one job offer per applicant since November 2005. This is a bad sign for labor, as it reduces some pressure for wages to rise. The lower unemployment rate, however, might be able to offset that effect. At the same time, it should be good news for employers, who still need to make better choices with regard to hiring.

With relation to hiring practices, we saw one other interesting nugget of information in the ministry’s report. In fiscal 2006, the number of workers in Japan contracted to work by staffing firms and temp agencies exceeded 3 million for the first time.

Fiscal 2006 ended in March 2007, and we saw an increase of 26.1% in the number of workers under contract with staffing agencies compared to fiscal 2005. Of course, FY2005 was the previous record holder.

Here’s where things might get interesting for investors. The government seems to be continuing to deregulate the staffing industry, which means that these firms are able to send workers to more and more types of industries. As this has happened over the past few years, profit and revenue at temporary staffing agencies has soared; In fact, in FY2006 revenue leapt 34.3% to a record 5.42 trillion yen at such firms.

Filed Under Economic Reports, Labor and Wages, Unemployment