How Japan's Unemployment Rate Dropped Even As 280,000 People Lost Their Jobs

Back in August 2010, Zero Hedge was ostracized for daring to first point out the massive distortion to the US unemployment rate as a result of the collapse in the labor force participation rate, and the far less realistic modeling of the US labor force. We said that while the US unemployment rate was shown to be steadily declining, the real unemployment rate when one factors in a realistic participation rate is well above 10%. It still is.

Since then not only tenured Wall Street weathermen but Janet Yellen herself has admitted the unemployment rate is no longer a meaningful estimation of slack in the US economy, in other words it is a purely propaganda data point that serves a political purpose (look how strong the economy is) to boost confidence, and no other.

So now that Japan has decided to follow in US footsteps and aggressively devalue its way to prosperity and a Keynesian utopia, Abe will need to adopt every trick in the BLS book to survive even as the Japanese economy is crashing and burning, courtesy of the plunging Yen which however is boosting the "wealth effect" for a small but powerful and wealthy portion of the population, and is thus tolerated.

And so it has.

Yesterday Japan amazed everyone when it reported that its unemployment rate had dropped yet again, this time to 3.3%, the lowest since April 1997.

The paradox is that while the number of Japan's unemployed dropped by 20,000, the number of those employed plunged by 280,000! Or as Goldman calls, it "growth in jobholders looks to have peaked amid a lack of recovery momentum in the economy"

But how can that result in a lower unemployment rate? Simple. The answer is shown on the chart below.

 

And there you have it, :BLS labor data fudge 101.

Japan's labor "statistics" office just crashed the labor force, in this case by 340,000 in one month (following a drop of 190,000 in March and 20,000 in February) in order to push the unemployment rate lower as 280,000 people lost their jobs.

But one doesn't need to even dig that deep to figure out just how cooked Japan's books are. As the FT noted overnight:

The figures highlight a crucial paradox in Japan’s economy: even as the labour market tightens, workers are not extracting pay rises. The Bank of Japan is relying on wage increases to boost consumption and create a virtuous circle of higher inflation.

Indeed, alongside the employment data Japan also reported household spending which once again dropped, wildly missing expectations of a 2.8% increase, and confirming that Abenomics is the worst thing that could have happened to Japan's economy. Goldman has the breakdown:

Household spending falls again after a rebound in March; consumption remains weak:

 

Based on the Household Survey, real consumer spending fell 1.3% yoy, coming in well below the market consensus for +2.8%. However, this is partly due to non-consumption spending items that should essentially not be included in consumption, such as money gifts. Core consumption, which excludes such items, rose 1.4% yoy. We believe this suggests that consumption recovery is still weak, given core consumption in April 2014 was at a slump at -6.6% yoy. Even on a seasonally adjusted mom basis, real consumption spending and real core consumption fell 5.5% and 3.5%, respectively, suggesting that the consumption recovery in March (+2.4% and +2.8%, respectively) was a one-off event. Core consumption fell to the average level seen in Apr-Jun 2014, a period right after the consumption tax hike.

 

Real disposable income remains sluggish: Real disposable income of workers’ households rose 0.1% mom in April, coming in broadly flat mom (March: -0.9%). While we cannot determine the trend based on the March figure alone given that real disposable income fluctuates significantly every month, the figure has been sluggish since end-2014.

 

So what is really going on in Japan and how does one explain the complete lack of an increase in either spending or wages, yet coupled with a 3.3% unemployment rate? Well, as noted above, the unemployment rate is a fabricated, statistica gimmick, goalseeked to "confirm" that Abenomics is working, when in reality it isn't, and is merely nudging the denominator in the employment rate calculation.

But the real answer is the following. Just like in the US, all of Japan's recent "hiring" has been of part-time workers at the expense of full-time jobs, leading to increasing wage slack...

... and not only that, but just like in the US, focusing primarily on senior citizens and housewives.

 

And that is how you stage and fabricate a "recovery" right in front of everyone's eyes: a Copperfieldian sleight of hand which works only as long as everyone is perfectly happy to be lied to by their government.

Source: Japan Statistics Bureau