TOKYO (AP) -- Japan's unemployment rate fell to 4.9 percent in December, the government said Friday in a piece of encouraging news for the world's No. 3 economy.

The seasonally adjusted figure is better than Kyodo news agency's average market forecast of 5.1 percent and suggests that the labor market may be starting to benefit from improving corporate profits.

The result marks the first time the unemployment rate has dropped below the 5 percent level in 10 months.

The number of jobless in December stood at 2.98 million, down 6 percent from the previous year, according to the Ministry of Internal Affairs and Communications. Those with jobs rose 0.1 percent to 62.28 million.

The government on Friday also said in a separate report that consumer prices fell for the 22nd straight month, though the pace of decline slowed.

The key consumer price index, which exclude volatile fresh food prices, fell 0.4 percent from the previous year as education, housing and furniture costs went down.

The preliminary core CPI for the Tokyo area -- considered an indicator of broader price trends for the country -- fell 0.2 percent for December.

Deflation raises individual purchasing power but is generally bad for the overall economy, as it cuts into company profits and can trigger job and wage cuts. It also means that even at zero, real interest rates are too high.

Despite some signs of an improving economy, households were cautious about their budgets. Household spending in December tumbled 3.3 percent from the previous year, the government said.