Monday, January 24

The real pain of unemployment in China masked by official data

China’s steady unemployment rate is masking pain in the labor market that leaders will find hard to ignore as they seek to stimulate the economy in a crucial political year.

Alternative indicators and anecdotal reports suggest that unemployment is worse than official monthly figures show. From weak consumer spending to tight Covid control measures and government regulatory crackdown on the property and educational technology industries, the job market is under considerable pressure, economists say.

Jobs are a top consideration for government officials as the Communist Party prepares for a leadership meeting twice a decade later this year. Beijing has already signaled a pro-growth bias in its policies, with economists expecting interest rate cuts and a rebound in fiscal spending early in the year.

The surveyed urban unemployment rate of 5%, slightly better than pre-pandemic levels, is expected to remain unchanged when the government releases the December data on January 17.

However, there are several problems with the survey, which are becoming severe in the current recession: the figures are not sensitive to changes in the number of immigrants from rural China working in cities; They also do not capture the number of people who have left the labor market for more than three months or those who cannot start working, for example, because they have to quarantine.

Lou Jiwei, a former finance minister, also recently highlighted concerns about China’s statistics, saying they do not adequately capture negative economic changes. Specifically on employment data, he said that official statistics count new jobs created but do not keep track of whether those people are laid off after six months or more.

These are some of the key reasons why economists believe that China’s labor market is under pressure.

problematic services

The service industry is the largest source of employment in China and employs about 47% of the workforce. Consumer spending on contact services, such as travel and meals, was consistently weak last year, making companies in those sectors reluctant to hire new workers. Business closures as China imposes strict restrictions to eradicate covid infections have also reduced demand.

The employment sub-index of China’s Non-Manufacturing Purchasing Managers Index, which tracks hiring intentions in the construction and services sector, has remained consistently below pre-pandemic levels for most of the past 12 months. The economy created 12 million new urban jobs in the first 11 months of 2021, according to official data, down from the 12.8 million created in the same period of 2019.

Migration movements

China has a population of about 180 million migrant workers who reside part of the year in the poorest rural areas but work most of the year in cities. Before the pandemic, the number of those workers increased between 2 and 3 million each year, according to official data. Migrants leaving cities are not included in China’s urban unemployment survey.

Official data shows that there has been no growth in the migrant worker population since the pandemic. Lu Feng, an economist at Peking University in Beijing, estimates a gap of 6 million between the number of immigrants currently working in cities and the pre-pandemic trend.

“The relative decline of millions of migrant workers in two years could cause a loss of income of hundreds of billions of renminbi,” he said.

Some believe the departures could be worse than official data suggests. Economists at Guolian Securities Co. Ltd. found that, in recent months, retail sales in provinces that generally have net immigrant outflows have been stronger than in provinces that normally see net inflows, suggesting that a large number of immigrants stay closer to home.

“We believe that data on consumer goods retail sales provide evidence of job repatriation,” they wrote.

Shrinking industry

China’s exports soared during the pandemic and many factories struggled to find workers. However, official data showed a downward trend in manufacturing employment, probably in part due to increased automation.

The average number of workers in industrial companies with incomes above 20 million yuan ($ 3.1 million) fell to 7,398 in November 2021 from 7,419 in November 2020, according to official statistics. Textile and apparel companies saw the biggest drop by that measure.

The government sparked panic in financial markets last year with its ban on companies offering for-profit after-school tutoring and its measures to control the vast real estate sector. Both have had a negative impact on the job market. One of China’s leading tutoring companies revealed this week that it laid off 60,000 workers last year. Wages in the education, tourism and real estate sectors fell in the final quarter of 2021, according to online job market Zhaopin.

Li Shi, an economist at Beijing Normal University, said Beijing’s crackdown on real estate should be relaxed as it hurts low-income workers.

“The policy of tightening in the real estate sector is a bit excessive,” he said. “The construction workers in this sector are all migrant workers.”


The official unemployment survey defines the unemployed as those who have actively looked for a job in the last three months and could start a new job within two weeks. China has quarantined hundreds of thousands of people, usually for weeks, as part of coronavirus control efforts since the summer; these people would not meet the second condition and would not be counted among the unemployed.

Due to the weak labor market, a record number of young people are preparing to take exams to qualify for graduate courses or enter the civil service. The numbers taking those tests in 2021 increased by more than 1.6 million since 2019, economists at Minsheng Securities Co. Ltd. said in a note.

Since they would not be counted as job seekers, “the actual work pressure of college students is higher than the unemployment rate shows,” they said.

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