China’s Job Market Under Stress
China’s job market has started to show signs of stress, putting pressure on the government to intensify fiscal spending to prevent the economy from weakening further.
Like politicians the world over, Chinese leaders’ biggest single economic worry is whether unemployment is under control, and analysts say the job outlook will help determine whether they launch a big stimulus effort as they did nearly four years ago.
So far the labor market has held up much better than in late 2008 when 20 million migrant workers lost their jobs. But cracks are appearing and that experience showed how the situation can change virtually overnight in China.
“Depending on how deep the growth slowdown is, unemployment can deteriorate very suddenly,” said Ding Shuang, an economist with Citi.
China, which publishes the bulk of its second-quarter economic data on Friday, is expected to have grown about 7.5 per cent, its slowest pace in three years.
To arrest this slowdown, Premier Wen Jiabao has vowed in recent days that the government will spearhead more investment projects and the central bank has cut interest rates twice in the past month.
But getting a read on China’s labor market is no easy task. Amid the blizzard of data released this week, there will be no reliable number equivalent to the unemployment rates published in Europe and the US. This is because China’s official jobless figure does not count the 200 million migrant laborers who staff the country’s factories and construction sites, and are the most vulnerable during a downturn.
However, partial indicators and anecdotal evidence suggest job cuts are spreading and that it is getting tougher for workers to find jobs.
First, China’s purchasing managers’ index, an important gauge of the manufacturing sector, pointed to a mild contraction in the number of jobs on offer last month.
Second, a central bank survey showed that sentiment about employment prospects fell sharply in the second quarter, nearing its lowest since 2009.
Finally, the human resources ministry estimated that the ratio of job openings to job seekers fell from 108 to 105 over the past three months. The implication is that there are still more jobs than would-be workers – a testament to China’s remarkably tight labor market, a big frustration of companies in recent years – but that the tide may be turning.
Anecdotally, there have also been reports of mounting trouble, especially among the companies most exposed to the rapidly cooling property market.
Several of the country’s largest heavy industrial companies have fired workers or implemented hiring freezes over the past several months, though they have been cautious over how they discuss the news.
Sany Heavy , China’s biggest maker of construction equipment, insisted last week that it was not making any large-scale job cuts, though it was controlling the growth of its 51,000-strong workforce due to the “slowing pace of development in the industry” in China. But an employee told the Financial Times that job cuts had been occurring in its manufacturing, sales and research divisions since last year.
China’s coal industry – the largest in the world and the backbone of the country’s power sector – could also be headed for job cuts, according to traders. “Some coal mines have started taking turns taking ‘holidays’,” said a gloomy coal trader in Dalian. “If the situation continues, the coal industry will see job cuts.”
At Sinovel , the third-largest wind turbine maker in the world, employees who leave are not being replaced, and hundreds of new hires had their contracts cancelled in May before they had even started work, according to an employee who was not authorized to speak to the media. The company declined to comment.
Workers at thousands of smaller companies in the construction sector are also feeling the pinch.
On a recent sunny afternoon, a dozen men rested on cloth sacks packed with their belongings under a tree near Liuliqiao, a junction for migrants from the countryside who come to Beijing for work. But they were leaving the city, going back to their small patches of farmland.
One of them, a Mr Yang, said the group had been working on a 17-storey apartment building in Xianghe County, just outside Beijing, but construction had stopped and their wages only half paid.
“It’s really not easy finding work this year, so I’m going to go home to look after the wheat and cotton,” he said, sighing. “When there are jobs to be had again, I would like to come back to the city.”
Additional reporting by Gwen Chen and Emma Dong