Japan's job availability fell to a six-year low and employment conditions worsened in July, government data showed Tuesday, highlighting the severe blow dealt to workers by the coronavirus pandemic.

The job availability ratio dropped to 1.08 from 1.11 in June, falling for the seventh straight month to the lowest level since April 2014, according to the Ministry of Health, Labor and Welfare. The ratio means there were 108 openings for every 100 job seekers.

A "Hello Work" job placement consultation counter set up by the Kanagawa Prefecture in Yokohama to support new graduates is pictured in April 2020. (Kyodo)

The unemployment rate rose to 2.9 percent from 2.8 percent in June, according to the Ministry of Internal Affairs and Communications.

The jobs data painted a bleak picture of an economy that is struggling to emerge from recession after the coronavirus outbreak led to a slowdown of activity and a record economic contraction in the April-June quarter.

Despite the lifting of a state of emergency in May, economic activity has yet to return to pre-pandemic levels, making the outlook uncertain.

The services sector continues to struggle, with the latest data showing new job offers by hotels and restaurants plunging 44.0 percent from a year ago before seasonal adjustment. The number of offers in the manufacturing sector saw a 40.9 percent decline.

The reports demonstrate the challenge facing the successor to outgoing Prime Minister Shinzo Abe as jobs data are a lagging indicator of economic health. The government has been providing subsidies to companies to keep people employed amid the virus' spread.

"We are likely to see a bigger impact on employment going forward," said Toru Suehiro, senior market economist at Mizuho Securities Co.

"Japan's economy is expected to rebound in the July-September period, but there is a possibility that companies will still be reluctant to hire," he said, adding that the jobless rate will likely rise above 3 percent in the coming months.

The jobless rate has remained below 3 percent in recent years as the country has faced severe labor shortages amid the rapid aging of the population.

The labor ministry said in a separate report that the cumulative number of people who were fired or whose employment contracts were not expected to be renewed climbed to 50,326 at the end of August, up around 9,000 from a month earlier.

The increase likely reflected many temporary workers whose quarterly contracts would not be renewed after the current July-September quarter and received one month's notice.

The ministry has been collecting data on people who lost their jobs due to the pandemic since February and the pace of increase slowed from June, around the time when the Japanese economy gradually reopened.

Around 70,000 coronavirus cases have been confirmed in Japan, including about 700 from the Diamond Princess cruise ship that was quarantined near Tokyo in February.

In July alone, the number of jobless people increased 20,000 from the previous month to 1.96 million on a seasonally adjusted basis.

About 720,000 people voluntarily left their jobs, down 20,000, while 560,000 were forced out, down 40,000. About 490,000 people were looking for jobs, up 20,000, according to the internal affairs ministry data.

The jobless rate for men fell 0.1 percentage point to 3.0 percent, while that for women rose 0.2 points to 2.7 percent.

The total number of employed people increased from 110,000 to 66.48 million.

Whoever succeeds Shinzo Abe as Japan’s prime minister will be confronted with growing signs that the job market is deteriorating in an economy laid low by the coronavirus pandemic.

FILE PHOTO: Office workers wearing protective face masks walk to head home at sunset amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan June 9, 2020. REUTERS/Issei Kato/File Photo

Top government spokesman Yoshihide Suga is emerging as a front-runner to become the next premier, heightening the chance the government will continue down the policy course set by Abe - notably the “Abenomics” strategy aimed at reviving the economy.

But the widening damage from COVID-19 is threatening job creation, among the few successes of Abenomics.

Japan’s unemployment rate crept up to 2.9% in July and job availability fell to a more than six-year low, data showed on Tuesday. Nearly 2 million people lost their jobs in July, about 410,000 more than in the same month last year, with the number of job losses rising for six straight months through July.

Among the hardest hit have been non-permanent workers, who makeup nearly 40% of Japan’s workforce and are concentrated in industries like hotels, restaurants, and entertainment.

The number of temporary workers fell by 1.31 million in July from a year ago, the biggest drop in more than 6-1/2 years.

“We’re seeing more non-permanent workers lose their jobs, especially in industries vulnerable to the pandemic,” said Shinya Kodera, an economist at Mizuho Research Institute.

Government subsidies and Japan’s unique labor practice, prioritizing job security over wage hikes, have kept the jobless rate low compared with around 10% in the United States.

But the pandemic is even starting to affect the hiring of university graduates, who until recently had no trouble landing jobs due to chronic labor shortages in an aging population.

As of Aug. 1, the ratio of students with job offers stood at 83.7%, 4.5 percentage points below the 2019 level, according to employment information provider Disco [6146.T].

Analysts say conditions have already taken a sharp turn for the worse as companies face pressure to slash labor costs.

“In Japan, workers can’t be laid off easily even when the economy turns bad. So firms will make adjustments in graduate hiring,” said Taro Saito, an executive research fellow at NLI Research Institute.

Naoki Ishihara, a 24-year-old graduating this year, had a job offer from a design company canceled in February. “It was an offer for a job that I wanted to do, so it was a shock when it was withdrawn,” he told Reuters.

Job losses may spike when government subsidies to firms who keep employees under furlough end in December, analysts say.

Nobuyuki Sato, who owns a Japanese-style hotel in Yamagata, in northeast Japan, says the subsidies have helped him keep jobs even when his hotel was closed.

“I’m hoping the government will extend the subsidies for another year,” Sato said. “It’s hard to expect the infection number to start falling early next year,” he said.