As China’s economy slows towards its weakest growth in a quarter of a century, policymakers have comforted themselves that unemployment remains low, and with it the risk of social unrest.
Indeed, the jobless rate has become China’s key indicator, with Beijing saying it does not matter if economic growth falls short of a 7.5% target this year, as now seems possible, as long as employment holds up.
Analysts do see some risks building, with reports of provincial resistance to consolidation in employment-heavy manufacturing industries, and workers being kept on the payrolls of inefficient “zombie” firms, but don’t see a crisis for now.
The official urban unemployment rate was 4.07% at end September, barely changed from 4.08 percent three months earlier, but even the government thinks that understates joblessness and is busy testing a wider survey-based measure.
“Despite sluggish growth and continued credit market woes, the labour market remains remarkably stable - with hiring steady, the jobs outlook stable and profit margins rising at the their fastest pace in a year,” said Leland Miller, president of China Beige Book International, citing the result of the research firm’s third-quarter private survey.
Chinese media are noticeably short on the stories of mass lay-offs, padlocked factories and worker riots that were headline fodder in 2009 as the global financial crisis led to a collapse in export orders.
And while both the government and HSBC/Markit Purchasing Managers Indices (PMI) show manufacturing employment contracting in 2014, wages have risen.
“High growth in wages is not consistent with rising unemployment,” said Michael Pettis, a professor at Peking University’s Guanghua School of Management. Anecdotally, many company executives complain of difficulty finding workers.
“We have to add jobs,” Jazy Zhang, CFO at Shanghai-based videogame maker Giant Interactive Group, told Reuters, adding that even enhanced labour protection laws making it harder to get rid of underperforming workers had not discouraged them.
“We are in the talent business. We have to pick our battles.”
She said her company, which employs more than 1,500 people, has raised average wages by 12-15% annually in recent years and expected to maintain that pace in the near future.
Reason for concern
Giant’s experience reflects, in part, the attempt to shift the world’s second-largest economy toward higher-value services and away from its traditional growth engines such as manufacturing.
For example, data show that while agricultural employment has declined and mining jobs have stayed flat, hiring in service-oriented sectors such as IT, real estate and retail is growing at a brisk 20%. But there is still reason for concern, economists say.
For one thing, there are strong sectoral and regional disparities. A recent visit by Reuters to the northern city of Qiqihar revealed that some factories had put workers on subsistence wages. Others have simply stopped paying.
“Fifty percent of coal companies are not paying their employees on time. Do you count that as employment?” said Andrew Polk, a Beijing-based economist at the Conference Board.
“If people are still working but feeling poorer, that’s a problem,” he said. Wages are needed to drive more domestic consumption - another reform goal that itself drives job creation.
The number of labour incidents related to back pay in China has jumped in the second half of the year, according to data compiled by China Labour Bulletin, a Hong Kong-based NGO that works with mainland labour rights organisations.