Here we are following our previous article on unemployment in Japan, where we predicted the rate to be at 6.0 in August. A new reading 5.4% for June 2009 was published on July 31. At the same time, a new estimate of labor force is also available for June and it is possible to quantitatively predict the unemployment rate using the empirical relationship introduced in the previous article:
UE(t)= -1.5*dLF(t)/LF(t) +0.045 (1)
where UE is the unemployment rate at time t, LF is the level of labor force at the same time. There is no time delay between the change in the LF and UE. Figure 1 updates the observed and predicted curves in 2009. Both unemployment and labor force are estimated in labor force survey, which is not usually an accurate procedure in the short-term. 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.
Figure 1. Observed and predicted rate of unemployment in Japan.
All in all, the rate of unemployment in Japan has been increasing since the mid 2008. Results for August 2009 will be published in the end of September. Meanwhile, the estimate for July should show another uptick.