Japan's unemployment rate fell for the second straight month in January and household spending posted solid growth despite a decline in wages -- further signs of recovery in the world's second largest economy.

The jobless rate fell to 4.9 percent from a revised 5.2 percent in December, the Ministry of Internal Affairs and Communications said Tuesday. The result was better than the 5.1 percent expected by economists in a Kyodo News agency survey. "At least in the labor market, the worst is over," said Hideki Matsumura, senior economist at the Japan Research Institute.

The jobless rate reached a record high of 5.7 percent in July last year as Japanese workers were reeling from layoffs amid the global economic downturn. "The January figure reflects a recovery in Japan's economy," Matsumura said. "But the pace of the recovery is very slow. Many companies are still reluctant to hire people." Japan's economy emerged last year from its worst recession since World War II, but it remains threatened by deflation, a strong yen and sluggish domestic demand.

The fall in joblessness was driven by a drop in the rate for women to 4.6 percent in January from 5.1 percent in December as more women were taking up jobs in the medical and welfare sector, the ministry said. The rate for men improved to 5.2 percent from 5.3 percent.

The number of jobless people in January, however, rose by 460,000 from a year earlier to 3.23 million. In a separate report, the Ministry of Labor said Tuesday that the average ratio of job offers to job seekers came in at 0.46 in January from 0.43, where it had been steady since September. The figure means that there were 46 job offers for every 100 job seekers. It said the January ratio marked the first improvement since September.

Along with the improving labor market, Japan's consumer spending continued to grow. Household spending in January expanded 1.7 percent from a year earlier, marking the sixth straight month of increase, the Ministry of Internal Affairs and Communications said in a separate report. The figure represents a key indicator of private consumption, which alone accounts for around 60 percent of Japan's economy.

Spending on cars, including vehicle purchases, jumped 11.3 percent in January from a year earlier. The ministry said government incentives for consumers buying eco-friendly cars helped boost demand. Spending on food, including eating out at restaurants, grew 2.3 percent.

"Private consumption is showing steady growth," Matsumura said. "But to sustain that the government needs to implement fresh measures aimed at stimulating domestic demand." The ministry added that average monthly household income in January fell 0.5 percent to 434,344 yen ($4,900), marking the six consecutive month of year-on-year decrease.

The latest data come after the government announced Friday that industrial production in January rose for the 11th straight month amid demand in China and elsewhere in Asia, while retail sales increased for the first time in nearly a year and a half.

The country's key consumer price index, however, fell in January for the 11th straight month in a worrisome sign that consistently falling prices -- known as deflation -- still weighs on Japan's recovery.

Japan has wrestled with periods of deflation since the 1990s. Price declines are a burden as they can hamper economic growth by depressing corporate profits, spurring wage cuts and causing consumers to put off buying things. It also can increase debt burdens.

Japan's economy grew at an annual pace of 4.6 percent in the October-December period, the government said last month. Gross domestic product, or the total value of the nation's goods and services, has climbed for three straight quarters. (Yahoo Finance)