September Unemployment Rates in Japan and in Germany Pose Problems for Central Banks

Both Germany and Japan released labor force data for September today. Labor market conditions were weaker than expected in Japan and slightly stronger in Germany. The data are likely to restrain policy moves by both the Bank of Japan and the European Central Bank. In the case of Japan, the data suggest that the Bank may, once again, be thwarted in its desire to raise rates. In the case of Germany, the data are a reason for the European Central Bank to resist pressure to lower rates.

The Japanese unemployment rate rose to 4.0% from 3.8% in September while the German unemployment rate fell to 8.1% from 8.3%. Expectations had been for a decline in the Japanese rate and no change in the German rate. The unemployment rates for the two countries are shown in the first chart.

Even though the Japanese data are seasonally adjusted, they still exhibit a fair degree of volatility. To show a less busy picture we have used quarterly averages in the second and third charts showing the year to year percentage changes in total employment and unemployment in the two countries. The decline of 3% in Japanese employment in September from August led not only to an increase in the unemployed but also a 0.2% decline in the labor force. In Germany there was no change in the labor force and the increase in employment led to an equivalent decline in unemployment.