Japan's low unemployment: a BLS update and revision - United States. Bureau of Labor Statistics

Monthly Labor Review, Oct, 1993 by Sara Elder, Constance Sorrentino

Analysis of Japan's special labor force surveys for the years 1989 to 1992 confirms the Bureau of Labor Statistics previous findings that the overall unemployment rate in Japan, as measured by the regular monthly survey, is only slightly changed when adjusted to U.S. concepts of unemployment and is well below the U.S. unemployment rate. Broadening the unemployment concept to account for persons working pan time for economic reasons does not reduce the U.S.-Japan differential. However, when the concept is further broadened to include discouraged workers, the unemployment rates converge.

Analyses of Japanese unemployment are facilitated by the results of a special labor force survey conducted each February in Japan. The special surveys investigate in detail the labor force status of Japan' s population, providing analysts with a tool for better understanding the results of the regular monthly surveys, and allowing them to calculate broader measures of labor underutilization.

Using data from the special surveys, BLS reported on Japanese unemployment adjusted to U.S. concepts in 1984, 1987, and 1989.(1) This report updates the 1989 analysis to 1992, and also updates to 1992 the broader alternative unemployment measures (U-6 and U-7) for Japan in a nine-country comparison published in March 1993.(2)

This report also presents some revisions to the previously published data for 1988 and earlier years. These revisions are the result of a change in the way BLS interprets Japanese statistics on working part time for economic reasons, as well as the use of a new method of allocating the labor force according to full-time and part-time workers. The revisions result in lower rates for the U-6 and U-7 measures of labor underutilization. (This revised method was also used in the aforementioned March 1993 Review article. An explanation of the revisions is presented in the last section of this report.)

Adjustment to U.S. concepts

Table 1 shows the adjustments made to data from Japan's special surveys to bring the data closer to U.S. concepts. The U.S. concepts exclude from the labor force some persons counted as unemployed in the Japanese surveys, and include as unemployed some persons reported as not in the labor force. Although individually significant in magnitude, on balance the adjustments cancel one another and the overall adjusted Japanese unemployment rate remains virtually unchanged from the reported rate.

Most of the adjustments are made to data relating to the unemployed. According to the U.S. definition, the unemployed are persons who do not have a job during the survey week, are available for work, and have actively looked for work in the past 4 weeks. Persons waiting to begin a new job are also classified as unemployed if they are available to start work.(3) By contrast, in the Japanese surveys, the unemployed are all persons Who respond that they are unemployed, whether or not they have engaged in active job search in the past month; persons waiting to begin a new job are classified as not in the labor force.

Many who respond to the Japanese survey that they are unemployed have not actively sought work in the past month. Thus, when adjusting the data to U.S. concepts, these "inactive jobseekers" are subtracted from the reported unemployed. The effect of this subtraction would be significant if it were not offset by the addition to the reported unemployed of two groups classified by the Japanese as not in the labor force who would be counted as unemployed under U.S. concepts: (1) persons who had sought work in the past month and were available for work immediately, but were recorded as not in the labor force because they initially reported their status was housewife, student, or retiree, rather than jobseeker; and (2) persons who were waiting to begin a job within 1 month. However, BLS excludes from the latter group students awaiting jobs after graduation, on the basis that persons waiting to begin new jobs within 30 days must be available to start work during the survey's reference week in order to be classified as unemployed. The Japanese students would not be available to take up their new jobs until after graduation in March.

The adjustments to the labor force for comparability with U.S. concepts are small in relation to the size of the labor force. (See table 1 .) The adjustments are discussed in further detail in the previously mentioned studies.

Analysis of the February data over the 1984-92 period indicates that the adjustments to U.S. concepts often result in slightly lower unemployment rates for Japan than figures based on Japanese definitions. Prior to 1984, the special surveys were for the month of March. Analysis of the special surveys for March 1977 through March 1980 resulted in a slightly upward adjustment in Japan' s unemployment rate. (The March 1981-83 surveys did not ask the questions needed for this analysis.) However, March is a highly unusual month for the Japanese labor market because it is the end of the Japanese fiscal year when firms traditionally him new workers, and also the end of the school year when new graduates enter the labor market. February, while also a month of relatively high unemployment, is somewhat less seasonal than March and thus better represents the Japanese labor market on an annual average basis.