China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.
22 October 2012
Unemployment is arguably the most important, but least well measured, factor in China’s economy.
Low unemployment and rising wages signal economic health, making it less likely that the government will rush to pump up growth. The reverse – mass layoffs and stagnant income – have China’s decision makers lunging for the stimulus button.
The official unemployment rate, which stays suspiciously close to 4% in the deepest downturns and the wildest booms, is no reliable guide.
Following last week’s gross domestic product data download, the focus is on the outlook for China’s economy in the fourth quarter and beyond. China Real Time mines the best alternative sources of data on China’s labor market as a guide:
The best overall measure comes from China’s Ministry of Human Resources and Social Security. They publish a quarterly report on job opportunities and job seekers at local employment bureaus in 100 cities up and down the country.
The latest reading shows that in the third quarter demand for labor continued to outstrip supply. The ratio of job opportunities to job seekers stayed steady at 1.05, unchanged from the second quarter.
That’s a stark contrast to the 4th quarter of 2008, when the ratio plunged to 0.84 – reflecting mass layoffs in the export and construction sectors after the double whammy of global financial crisis and home grown real estate crunch.
A third quarter survey of more than 4,000 mainland firms by consultancy Manpower also suggested that most were planning to take on more workers, or keep their headcount steady, in the fourth quarter.
Manpower’s net employment outlook – the difference between the percentage of firms planning to add more workers, and the percentage planning to reduce headcount — edged down to 16 for the fourth quarter from 17 in the third. That’s in line with the average level in the years before the financial crisis.
Demand for new workers appears to be coming from the services sector, rather than manufacturing.
The Ministry of Human Resources data shows 3.82 million job openings in tertiary industry – or the service sector – in the third quarter, up from 3.58 million in the second quarter. That contrasts with a shrinking number of job opportunities in secondary industry – which includes manufacturing.
The Manpower survey also showed hiring intentions strongest in services, and weaker in manufacturing, mining and construction – industries tied to the fading growth of exports and real estate. The purchasing managers’ index (PMI) data – based on a monthly survey of hundreds of firms – confirms the picture of a stronger services sector.
The employment index on the official non-manufacturing PMI came in at 51 in September, down from earlier in the year, but still above the 50 mark that separates hiring from firing. The employment index on the manufacturing PMI came in at 48.9, the fourth month in a row below 50 – showing manufacturing firms shedding workers.
Delving into the details, there were more reassuring signs. The number of workers using employment bureaus to look for jobs because of unemployment or redundancy fell to 1.67 million in the third quarter from 1.8 million in the second.
The number of farmers and out-of-towners using employment bureaus to look for work increased to 2.49 million in the third quarter from 2.31 million in the second. That might reflect a higher number of redundancies, but could also reflect a growing number of farmers seeking factory work as wages rise sharply, increasing the appeal of off-farm labor.
The number of young adults looking for work – a group that might pose a particular risk to social stability – rose in the third quarter. But the demand-supply ratio for young workers and university graduates tilted toward stronger demand.
Wages continue to rise at a rapid clip, though slower than recent peaks.
Urban per-capita disposable income was up 12.5% year-on-year in the third quarter, unchanged from the second but down from 15.4% at the end of 2011. Migrant worker wages were up 13%, a deceleration from 20%-plus gains in 2011.
Even as the economy slows, pressure for higher wages remains. The China Labour Bulletin reported 37 strikes in September, up from 24 in August, with 12 resulting from demands for higher pay.
China’s labor market data remains patchy and infrequent. But the picture that emerges from what evidence there is suggests continued resilience.
Some manufacturing firms are shedding workers, reflecting the global trade and domestic investment slowdown. But there are no signs of the nationwide mass layoffs that were seen at end 2008.
Low unemployment and rising wages suggest that the economy is in decent shape and help explain why, despite a deterioration in key measures of growth over the summer and fall, Beijing has been in no rush to stimulate.The jobs data also provide glimmers of hope on the longer-term task of rebalancing China’s economy.
Wages are now growing faster than the economy as a whole. Apart from a brief period during the financial crisis, that’s the first time in almost a decade. A bigger slice of China’s economic pie for households is a pre-requisite for raising consumption.
As important, it’s the services sector rather than manufacturing that is adding the jobs. That’s also a sign that China is shifting away from exports and investment (which create jobs in manufacturing and construction) and toward domestic consumption (which creates jobs in services) as a driver of demand – another crucial ingredient of rebalancing.
– Tom Orlik and MinJung Kim.