Africa-Press – South-Africa. China’s steady jobless rate is masking pain in the labor market that leaders will find hard to ignore as they look to stimulate the economy in a crucial political year.
Alternative indicators and anecdotal reports suggest unemployment is worse than the official monthly figures show. From weak consumer spending to strict Covid control measures to the government’s regulatory crackdown on the edutech and property industries, the labor market is under considerable strain, economists say.
Jobs are an overriding consideration for government officials as the Communist Party prepares for a twice-a-decade leadership meeting later this year. Beijing has already signaled a pro-growth bias in its policies, with economists expecting interest rate cuts and a pick-up in fiscal spending early in the year.
The surveyed urban unemployment rate of 5% — slightly better than pre-pandemic levels — is expected to stay unchanged when the government publishes December data on Jan. 17.
However, there are several problems with the survey, which are becoming stark in the current downturn: the figures aren’t sensitive to changes in the number of migrants from China’s rural areas who work in cities; they also don’t capture the number of people who have dropped out of the labor market for more than three months or those unable to start work, for example because they have to quarantine.
Lou Jiwei, a former finance minister also recently highlighted concerns about China’s statistics, saying they don’t properly capture negative economic changes. On jobs data specifically, he said the official statistics count new jobs created but don’t follow up on whether those people are then laid off after six months or more.
Here are some of the key reasons economists believe China’s labor market is under stress:
– Troubled services. The services industry is the biggest source of jobs in China, employing about 47% of the labor force. Consumer spending on contact services such as travel and dining was consistently weak last year, making businesses in those sectors reluctant to hire new workers. Business closures as China enforces strict restrictions to stamp out Covid infections have also reduced demand.
The employment sub-index for China’s non-manufacturing purchasing manager’s index, which tracks hiring intentions in the service and construction sector, has stayed 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, below the 12.8 million created over the same period in 2019.
– Migration moves. China has a population of about 180 million migrant workers who reside some of the year in poorer rural areas but work most of the year in cities. Before the pandemic, the number of such workers increased by 2-3 million each year, according to official data. Migrants who leave the cities aren’t included in China’s urban unemployment survey.
Official data shows there’s been no growth in the migrant worker population since the pandemic. Lu Feng, an economist at Peking University in Beijing, estimates a 6 million gap between the number of migrants currently working in cities and the pre-pandemic trend.
“The relative decrease of millions of migrant workers in two years could cause hundreds of billions renminbi of income loss,” he said.
Some believe that the outflows could be worse than the official data suggests. Economists at Guolian Securities Co. Ltd. found that over recent months retail sales in provinces that usually have net outflows of migrants have been stronger than in provinces that normally see net inflows — suggesting large numbers of migrants are staying closer to home.
“We believe that the data on retail sales of consumer goods provide evidence of labor repatriation,” they wrote.
– Shrinking industry. China’s exports boomed during the pandemic and many factories struggled to find workers. Nonetheless, official data showed a trend of shrinking employment in manufacturing, likely in part due to increased automation.
The average number of workers at industrial enterprises with revenues 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 largest decline by that measure.
The government caused panic in financial markets last year with its ban on companies offering after-school tutoring for profit, and its moves to rein in the vast real estate sector. Both have had a negative impact on the job market. One of China’s top tutoring companies revealed this week it had fired 60,000 workers last year. Wages in the education, tourism, and real estate sectors all 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 the property sector should be relaxed as it hurts low-income workers.
“The policy tightening in the real estate sector is a bit excessive,” he said. “Construction workers in this sector are all migrant workers.”
– Drop outs. The official jobless survey defines the unemployed as those who have actively sought a job within the past three months and would be able to start a new job within two weeks. China has placed hundreds of thousands of people in quarantine, usually for weeks at a time, as part of coronavirus control efforts since the summer — those people wouldn’t meet the second condition and would not be counted among the unemployed.
Because of the weak labor market, record numbers of young people are preparing to take exams to qualify for post graduate courses or enter the civil service. The numbers sitting those exams in 2021 rose by more than 1.6 million from 2019, economists at Minsheng Securities Co. Ltd. said in a note.
As they would not be counted as job seekers, “the actual employment pressure of college students is higher than the unemployment rate shows,” they said.