WRAPUP 3-Japan job woes dampen hope for demand recovery

Tue Jun 30, 2009 5:24am EDT

(For more stories on the Japanese economy click [ID:nECONJP])

* Jobless rate rises to 5.2 pct, highest since 2003

* Job availability at record low; wages slide for 12th month

* Data clouds household spending rise as stimulus kicks in

* PMI up for 5th straight month to one-year high (Adds graphic on jobs data)

By Tetsushi Kajimoto

TOKYO, June 30 (Reuters) - Japan's jobless rate rose to a new 5-1/2-year high in May and job availability sank to a record low, fuelling worries that bleak job conditions may overwhelm government efforts to boost consumption, delaying an economic recovery.

"The effects of stimulus spending are likely to be short-lived," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Given a drastic cut in summer bonuses among manufactureres, personal consumption will slump again from the summer onward and put downward pressure on the overall economy."

The number of employed people fell by 1.36 million from a year earlier, a record rate, as manufacturers and the service sector cut staff even as the country's export industries start to recover from a sharp downturn in the global economy.

The weak jobs data helped push the yield on the five-year Japanese government bond JP5YTN=JBTC to a four-month low of 0.685 percent as it supported market expectations that any recovery in the world's No.2 economy will be frail. [JP/]

It also overshadowed the first annual gain in household spending in 16 months, which was helped by government stimulus such as one-off cash payments to each household and subsidies on energy-efficient electronics that boosted purchases of TVs.

Household spending rose 0.3 percent in May from a year earlier, beating market expectations for a decline of 1.6 percent. But economists warned against reading too much into the data, which they say has sampling flaws. [JPALLS=ECI]

"The stimulus package appears to be improving consumer sentiment," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. "But given the rise in unemployment and likely fall in bonus payments in June, we cannot be too optimistic about consumption."

Finance Minister Kaoru Yosano said the rise in Japan's jobless rate underscored the need for the government to guide economic policy flexibly. [ID:nTKX006336]

Although some leading economic indicators such as industrial output have rebounded recently, many Japanese firms are likely to keep cutting wage costs to eke out profits amid weak demand.

With firms not hiring, the jobs-to-applicants ratio slid to 0.44, meaning only about four jobs were available for every nine applicants, the worst since the data started in 1963.[JPJOBA=ECI]

The seasonally adjusted unemployment rate rose to 5.2 percent -- the highest since September 2003 and in line with market forecasts -- from 5.0 percent in April. [JPUNR=ECI]

Economists expect the jobless rate to surpass a postwar peak of 5.5 percent and hurt domestic demand, which had seen a limited recovery even during the boom years as the population ages.

For the graphic showing Japan's jobless rate and job availability, click here

WAGE PRESSURES

Boding ill for personal consumption, Japanese wage earners' total cash earnings fell in May at a faster annual pace than in the previous month, marking the 12th consecutive month of decline, while overtime pay slid for the 10th straight month, indicating companies continued to see soft demand. [JPOVRT=ECI]

With job conditions deteriorating, housing starts fell 30.8 percent in May from a year earlier to a level last seen in 1966, marking the sixth straight month of annual declines. [JPHST=ECI]

Orders received by construction firms in May fell a record 41.9 percent from a year earlier to 454.8 billion yen ($4.74 billion), the lowest monthly amount on record. [JPCORD=ECI]

Economists polled by Reuters forecast economic growth of 0.4 percent in April-June, expecting the world's second-largest economy will climb out of recession after four straight quarters of contraction, Japan's longest such spell on record. [ECILT/JP]

The pace of contraction in Japanese manufacturing activity slowed for a fifth straight month in June as companies gradually recover from Japan's deepest postwar recession. [JP/PMIM]

The Nomura/JMMA Japan Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 48.2 in June, with both output and export components of the index edging above the 50 marks that separate contraction from expansion for the first time since 2008.

For a graphic tracking Japan, U.S., euro zone and China PMI, click here (Additional reporting by Hideyuki Sano, Stanley White and Leika Kihara; Editing by Michael Watson & Kim Coghill)

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