The Global Reach Of Kuroda’s Premature Celebrations

The unemployment rate isn’t just misleading in the US, though the gap between what it suggests here and what isn’t happening is now enormous. This idea of a labor shortage, or LABOR SHORTAGE!!!! as each case may be, was itself as global as synchronized growth when it showed up in later 2017. There were stories about Chinese factories unable to source workers. European service providers had grown concerned over staffing levels.

Powerful, powerful stimulus.

In March 2018, it was reported that Japan’s unemployment rate had fallen to just 2.4%. Inflation was on the rise, too, so you can guess what they were saying about the Japanese economy and specifically its employment situation:

Monetary stimulus has succeeded in boosting Japan’s economy and driving the jobs market to its tightest state in decades, with labour shortages spreading across the country.

It was at this point Haruhiko Kuroda decided to take a victory lap. On March 2nd of last year, the Bank of Japan’s Governor quite purposefully let it be known that policymakers were considering an end to QQE. After just about five years of it by then, there was growing confidence it was nearing its goals.

The following month, on April 3rd, Kuroda went further. Clearly adoring the positively glowing stories written about his bold efforts and stubborn persistence, BoJ’s top official specifically stated that they were talking about the exit. “Internally we’re conducting various discussions,” he said, having been formally re-appointed to another term just weeks before.

Was it politics? Or, more likely, was Kuroda embarrassingly premature in claiming success?

Either way, depending upon the unemployment rate in Japan as a measure of economic progress is dangerous business. As has become usual, something else was going on behind the ratio.

Whereas in the United States the problem is labor force participation, the unemployment rate’s denominator, over on the other side of the Pacific it’s quite different. Japanese firms are employing more workers and more Japanese workers are joining the labor force. But in the aggregate, the totality of Japan’s workforce is working less.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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