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Adjusted Japanese unemployment rate remains below 3 percent in 1987-88.

Adjusted Japanese unemployment rate remains below 3 percent in 1987-88 In addition to regular monthly labor force surveys, Japan conducts a special labor force survey each year to investigate, in more detail, the labor force status of the population. These special surveys allow for a more complete analysis of Japanese unemployment under U.S. concepts. Such analyses were presented in 1984 and 1987 articles in the Review, and this report updates the results to include data from the February 1987 and 1988 special surveys.(1)

Although the Bureau of Labor Statistics does not use the special survey results to adjust the overall Japanese unemployment rate to U.S. concepts, the Bureau continues to follow the surveys to better understand the results of the regular monthly surveys. The 1987 and 1988 special surveys continue to support the Bureau's contention that the Japanese unemployment rate is only slightly changed when U.S. concepts are applied. In addition, the BLS uses the special surveys for two other purposes: they allow calculation of (1) adjusted unemployment rates by sex; and (2) expanded unemployment measures which go beyond the conventional unemployment rate to cover persons involuntarily working part time and discouraged workers.

Adjustment to U.S. concepts

Several adjustments are made to the special surveys to bring them closer to U.S. concepts. After adjustment, some persons counted as unemployed in the surveys are excluded from the labor force, and some reported as not in the labor force are included among the unemployed. The magnitude of each of the adjustments is significant, but, on balance, they tend to cancel each other out, leaving the Japanese unemployment rate virtually unchanged. The adjustments are discussed in detail in the previous studies.

In both 1987 and 1988, the adjustments to U.S. concepts result in a slightly lower unemployment rate than figures based on Japanese definitions. This was the same direction indicated by analyses of previous surveys for February. However, special surveys conducted in March 1977-80 led to a slight upward adjustment. As discussed in the previous articles, March is a highly unusual month for the Japanese labor market because it is the end of the Japanese fiscal year, when firms traditionally take on new workers, and also the end of the school year, when new graduates enter the labor market. Although February is also a month of higher than average unemployment, there is somewhat less seasonality associated with this month than with March.

The BLS comparative unemployment rates program regularly compiles unemployment rates adjusted to U.S. concepts for certain foreign countries. For Japan, BLS does not attempt to make annual or quarterly adjustments based, on the February and March special survey data. Instead, BLS accepts the published Japanese unemployment figures as closely comparable with U.S. concepts and makes some minor adjustments to the labor force figures. BLS adjusts the Japanese labor force figures to exclude unpaid family workers working less than 15 hours. For civilian unemployment rates, the National Defense Force is also excluded. These small adjustments to the denominator of the unemployment rate usually make no difference; on occasion they raise the annual average rate by 0.1 percentage point.

Comparisons by sex

Although the overall Japanese unemployment rate is changed only slightly when the special survey data are adjusted to U.S. concepts, there is a more significant difference in the adjusted rates for men and women. The official Japanese data show virtually no difference in unemployment rates for men and women. However, according to the BLS adjustments, women have higher unemployment rates than men.

Women account for most of the unemployed originally classified as not in the labor force, while men account for most of the unemployed who did not actively seek work in the month of the survey.

An expanded unemployment concept

Japan's unemployment rates, both on the official basis and adjusted to U.S. concepts, are well below U.S. rates. Annual civilian U.S. jobless rates of 6.2 percent in 1987 and 5.5 percent in 1988 contrast with adjusted civilian Japanese rates of 3.0 percent and 2.8 percent in February of those years. Other Western nations (Canada, France, Italy, United Kingdom) had rates in the 8- to 11-percent range during the same years. Is the comparative efficiency of the Japanese labor market really 2 or 3 times greater than that of most Western nations? A strict comparison of unemployment rates would arrive at that misleading conclusion. However, a substantial part of Japan's labor underutilization falls in the realm of underemployment (workers on reduced hours) and discouragement, or labor force withdrawal. These forms of labor slack do not show up in the conventional unemployment rate, but they are part of the Bureau's U-1 to U-7 framework of alternative unemployment rates.(2)

It was not possible to measure discouraged workers in Japan in exactly the same way as they are measured in the United States. The lower rate of the range includes persons who seem to fall strictly within the U.S. concept of discouraged workers; the upper rate of the range includes some who might not be counted under the U.S. definition, but they would fall under a broader concept of labor underutilization.

Comparisons of the U-6 and U-7 rates in relation to the conventionally defined rate (U-5) show that the Japanese rates are increased to a greater degree than the U.S. conventional rates. In other words, there is a convergence in the "unemployment rates" for the two countries when the definition is broadened. In addition, the gap between each of the three rates for the United States and Japan has narrowed between 1984 and 1988, as overall labor market conditions improved in the United States, but not in Japan. The following tabulation, shows the ratio of the U.S. unemployment rate to the Japanese rate:
 Rate 1984 1985 1986 1987 1988
 U-5 2.7 2.7 2.5 2.1 2.0
 U-6 2.1 2.0 1.9 1.7 1.7
 U-7 1.1-1.4 .9-1.2 .9-1.2 .8-1.0 .8-1.0

Under the conventional definition of unemployment (U-5), the tabulation shows that the U.S. rate was 2.5 to 2.7 times the Japanese rate during 1984-86, but the differential narrowed to about 2 during 1987-88. Similarly, the differential between the expanded rates (U-6 and U-7) also narrowed, both down and across the tabulation. When the unemployment definition includes persons working part time for economic reasons (U-6), the U.S. rate declined from about twice the Japanese rate during 1984-86 to 1.7 times during 1987-88. An even broader definition of unemployment which encompasses discouraged workers (U-7) illustrates that the U.S. and Japanese rates converged to approximately the same level. At the high end of the Japanese U-7 range, the Japanese rate has surpassed the U.S. rate since 1985. However, it should be emphasized that the upper Japanese U-7 rate includes some persons who might not be classified as discouraged workers under U.S. definitions.

Expanding the unemployment concept to include other elements of labor slack draws the Japanese rate closer to U.S. levels. Explanations for any remaining differential lie in such factors as the composition of the labor force, levels of frictional unemployment, and economic growth rates. FOOTNOTES

(1)In the Monthly Labor Review, see Constance Sorrentino, "Japan's low unemployment: an in-depth analysis," March 1984, pp. 18-27; and "Japanese unemployment: BLS updates its analysis," June 1987, pp. 47-53.

(2)The U-1 to U-7 framework was introduced in Julius Shiskin, "Employment and unemployment: the doughnut or the hole?" Monthly Labor Review, February 1976; pp. 3-10. For an international comparison based on the U-1 to U-7 framework, see Constance Sorrentino, "The Uses of the European Community Labor Force Survey for International Unemployment Comparisons," paper prepared for the Statistical Office of the European Communities, October 1987. Copies are available upon request to the author at the Bureau of Labor Statistics. Constance Sorrentino is an economist in the Division of Foreign Labor Statistics, Bureau of Labor Statistics
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Author:Sorrentino, Constance
Publication:Monthly Labor Review
Date:Jun 1, 1989
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