Pay attention to the movement in June's labor force report's suspended employment numbers

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June's labor force report will be made public on July 31st. Despite the fact that economic conditions have rapidly become unfavorable since the spread of coronavirus began this year in February, the seasonally adjusted full unemployment rate was 2.9% in May and the number of people fully unemployed was 1.97 million. That means the increase in full unemployment was only 0.5%/330,000 people higher than January. Because the employment systems are different, they cannot be naively compared, but it stands in stark contrast to the American unemployment rate which has had double-digit increases.

However, it is impossible to be optimistic. This is because the number of workers who are in suspended employment has drastically increased with most of the increase coming from the service sector. Workers in "suspended employment" (休業者) are those who maintain their employment status but do no work during the time frame of the report while still being be paid. The number of workers in suspended employment was 4.23 million in May, which is a decrease from 5.97 million in April. Nonetheless, it is now at a very high level, having increased by 2.74 million compared to the previous year.

Even though workers in suspended employment are counted as employed workers, it also includes many people who are facing the risk of unemployment. In actuality, 60,000 workers in suspended employment became unemployed in May. In addition, 40,000 workers in suspended employment become no longer part of the workforce. However, that includes some who have given up on attempting to find work and removed themselves from the labor market, effectively making them unemployed.

Even though the government's State of Emergency was ended in mid-May, people are not going outside and the pace of economic recovery has been sluggish. Even though it looks like it will be impossible to prevent the number of unemployed from increasing, how much economic recovery will occur and how effective the government policies will be will determine how much the number will increase by. How much that number changes will be a key indicator of Japan's economic future.

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