Japan's unemployment rate jumped unexpectedly in July while prices and consumer spending continued to decline, raising a note of doubt on the strength of the economic recovery here.
Japan's unemployment rate rose for the first time this year, jumping to 4.9 percent for July from 4.6 percent for June. Economists had expected the rate to remain unchanged. Spending by households of salaried workers fell 2.5 percent in July from a month earlier, the third consecutive monthly decline.
"These numbers were generally on the weak side of expectations, so it does raise the question of whether economic growth was as strong as the market would portray," said Ryo Hino, an economist for J.P. Morgan in Tokyo.
A report earlier this month showed that Japan's economy grew at an unexpectedly weak annual rate of 1.7 percent in the second quarter, sharply slowing from 6.6 percent in the first quarter and 7.4 percent in the last quarter of last year.
Still, Hino and other economists cautioned against reading too much into Friday's figures because other recent data, in particular strong exports and corporate profits, suggest Japan's recovery remains intact even if growth has backed off the torrid pace seen earlier this year.
Traders seemed to share that view. Stock prices initially declined on the reports, but Japan's benchmark Nikkei 225 stock average recovered to close up 0.7 percent, at 11,209.59.
Government officials and economists said the jump in the July unemployment rate was mostly a result of an increase in the number of job seekers as the improved economy drew people who had given up looking for work back into the job market. Some 90,000 new jobs were created in July, not nearly enough to absorb an increase of 320,000 entrants to the labor force.
"The economic recovery may be prompting people to look for new or better jobs, and is one reason the unemployment rate temporarily rose," Michio Matsumura, a statistics bureau official, told reporters, according to Bloomberg News.
The drop in household spending in July was also worse than expected. The decline came as a surprise to economists, who expected unusually hot summer weather to help spending. While sales of air-conditioners and beer have been rising, the increases were not enough to offset declines in spending on housing and entertainment.
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