Recession abating in US and Japan

Recent economic reports continue to show that the worst of the recession is probably over for the United States and Japan.

On Friday, the US Labor Department reported that non-farm payrolls fell by 345,000 in May. Although the unemployment rate rose to 9.4 percent, the highest since 1983, the number of jobs lost in May was the least in eight months, boosting hopes that the recession is easing.

While the decline in job losses for May represents only one month's data, it is consistent with the picture coming from reports on claims for unemployment insurance. Initial claims fell by another 4,000 to 621,000 in the week ending 30 May, boosting hopes that it had peaked at 674,000 in the week ending 28 March and that the recession is therefore coming to an end. In addition, continuing claims for unemployment insurance fell to 6,735,000 in the week ended 23 May from 6,750,000 the prior week, the first decrease in almost five months.

Earlier last week, reports from the Institute for Supply Management also indicated that the recession is abating. The ISM's manufacturing PMI rose to 42.8 in May from 40.1 in April while its non-manufacturing index rose to 44.0 from 43.7. Although both indices remain below the 50 level that traditionally separates expansion from contraction, they remain on rising trends that have been in place since late last year.

Today's data indicate that Japan's economy may also be past its worst.

A Ministry of Finance report on Japan's current account for April shows that the trade situation is improving. Although exports came in 40.6 percent below the level last year, on a seasonally-adjusted basis, they were 7.2 percent higher than in March.

And the improvement does not apply just to the external sector of the economy. The Cabinet Office's economy watchers survey shows improving sentiment among workers in economically-sensitive jobs in general. The survey's diffusion index for current conditions rose to 36.7 in May from 34.2 in April while the diffusion index for future conditions jumped to 43.3 from 39.7.

So based on the latest economic indicators, it looks like the recession is abating in the US and Japan.