Unemployment in Japan is approaching 6.0%

In June and August 2009, we published two articles at Seeking Alpha devoted to the evolution of unemployment in Japan [A1] and [A2], which predicted the rate of 6.0% in August 2009. On August 28, a new reading for July 2009 was reported by the Statistics Bureau of Japan. The (seasonally adjusted) rate for July was measured at 5.7%, i.e. 0.3% higher than in June. It is also 0.3% left to match our prediction of 6.0% in August, which is based on the model linking the rate of unemployment, UE(t), to the rate of change of labor force, dLF(t)/LF(t):
UE(t)= -1.5*dLF(t)/LF(t) +0.045 (1)
According to the results of labor survey presented on August 28, the level of labor force in for July was 66280000, i.e. 200,000 lower than in June. The number of unemployed people increased by 11,000 from June.
Figure 1 updates the observed and predicted curves for 2009. Because the accuracy of short-term estimates provided by labor surveys is not high, the monthly estimates of unemployment and labor force are prone to large measurement errors. So, the discrepancy between the observed and predicted curves likely manifests the problems with measurements, because in the long run the curves fit much better, as presented in Figure 2.
From 1, one can conclude that the rate of unemployment in August still may rise to 6.0%. On the other hand, this likely to be the peak of the unemployment growth and it will be declining to the long-term level between 4.5% and 5% [1,2] in 2009 and 2010.

[1] Kitov, I., (2006). The Japanese economy, MPRA Paper 2737, University Library of Munich, Germany, http://ideas.repec.org/p/pra/mprapa/2737.html
[2] Kitov, I., (2007). Exact prediction of inflation and unemployment in Japan, MPRA Paper 5464, University Library of Munich, Germany, http://ideas.repec.org/p/pra/mprapa/5464.html



Figure 1. Observed and predicted rate of unemployment in Japan in 2009.


Figure 2. Observed and predicted rate of unemployment in Japan between 1998 and 2008.

Figure 3. Prediction of the evolution of unemployment rate in Japan between 1990 and 2050.