<\/p>\n
An employee on the production line at a facility in Jiuquan, Gansu province, China.<\/p>\n
(Bloomberg) — China\u2019s labor market is deteriorating just as deflationary pressures showed initial signs of easing, threatening to reverse progress by emptying the pockets of consumers Beijing needs to spend again.<\/p>\n
Most Read from Bloomberg<\/p>\n
To the surprise of some economists, the distress is suddenly showing up in a range of government data sets to an extent unseen in months. None of the analysts surveyed by Bloomberg News had expected urban unemployment to tick up last month, when it rose to the highest level since February.<\/p>\n
And private figures paint an even bleaker picture: a survey of 300 company executives by Cheung Kong Graduate School of Business found companies last month were the most pessimistic about future hiring since early 2020.<\/p>\n
\u201cThe reality of unemployment is probably worse than what we see in official data,\u201d said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. \u201cThis means more downward pressure on wages, which will drive further deflation.\u201d<\/p>\n
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With deflation at the factory gate finally turning the corner in August, a souring labor market will present some of the biggest challenges to policymakers as they try to end nine straight quarters of economy-wide price declines.<\/p>\n
The moment is especially perilous as China is already coping with consumer malaise and a growth slowdown in exports that sustain tens of millions of jobs. Absent an easing of strain in the labor market, it\u2019s likely Beijing will have to act to defuse the risks it poses to domestic consumption.<\/p>\n
\u201cChina needs to take bigger steps to break the negative loop\u201d between the weak labor market and domestic demand, said Yeung. \u201cIt will take more than one or two months of policy stimulus\u201d or a modest 10-basis point rate cut, he said.<\/p>\n
Among the factors exacerbating the problem is a record avalanche of 12.2 million college graduates entering the jobs market this year, adding to a mismatch between an abundant supply of highly-educated workers and a shortage of white-collar openings.<\/p>\n
As they left school during the summer months, the official youth unemployment rate spiked in August by more than a percentage point from July to 18.9%, the maximum since the measure was revamped in 2023 to exclude students. In the backdrop, joblessness in 31 major cities rose to its worst in a year.<\/p>\n
Other gauges tell a similar story. An index compiled by Goldman Sachs Group Inc. based on data from various purchasing managers\u2019 index surveys weakened for the first time in four months in August.<\/p>\n
National Bureau of Statistics spokesperson Fu Linghui addressed the employment situation during a briefing this month, describing it as maintaining a \u201cstable\u201d pattern and attributed the increase in the overall joblessness to the graduation season.<\/p>\n
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The issue of employment moved up the agenda for China\u2019s leadership at the height of tensions with the US over trade earlier this year.<\/p>\n
As part of an effort to stabilize the jobs market, the decision-making Politburo promised in April to increase the proportion of unemployment insurance funds that can be returned to firms hurt by the higher tariffs. Later the same month, Vice Minister of Human Resources and Social Security Yu Jiadong said the government will take steps to improve workers\u2019 skills and prioritize youth employment.<\/p>\n
The latest disappointing stretch could prolong the hardships felt by Chinese workers from the impact of the pandemic and a years-long property slump.<\/p>\n
Worsening employment conditions are also a key obstacle for officials who want to boost consumer spending and avert a further descent into deflation in the form of a downward spiral in wages and corporate profits that threatens to cripple domestic demand for years to come.<\/p>\n
Already, the average salary among private companies \u2014 which account for more than 80% of jobs \u2014 grew only 1.7% last year from 2023, the slowest pace on record. Other private data points to an even more severe decline in incomes as well as household sentiment regarding jobs.<\/p>\n
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Apart from a seasonal surge in college graduates, other factors have been at play over the past few months.<\/p>\n
A ruling by China\u2019s highest court that made it impossible for workers and their employers to waive social insurance contributions starting from September likely added pressure on private and smaller firms.<\/p>\n
While it\u2019s unclear how strictly the decision has been enforced, it created huge uncertainty for employers because they could face substantially higher labor costs if officials take the rules seriously. <\/p>\n
\u201cChina\u2019s social security contributions are very high, and private companies have long avoided full payment,\u201d Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics, said at an event in Beijing this month. \u201cIf it\u2019s forced upon them, many private companies will surely have to lay off staff or reduce salaries, or even switch to flexible or contract workers.\u201d<\/p>\n
The adoption of artificial intelligence presents a more lasting challenge for the economy, bringing with it the threat of widespread job losses.<\/p>\n
Already, increased automation among manufacturers has led to a rise in contract workers in the sector \u2014 as opposed to formal employees who enjoy better benefits and are more costly to fire, according to research by Zhang Dandan, a Peking University economist.<\/p>\n
What Bloomberg Economics Says…<\/p>\n
\u201cStrict implementation of compulsory social security contributions will expand coverage and improve employee welfare over the long term. But in the short term, it could erode household disposable income, running counter to the government\u2019s urgent desire to boost sluggish consumption.\u201d<\/p>\n
\u2014 David Qu. For full analysis, click here<\/p>\n
As the government shifted its focus to curbing overcapacity and price wars in recent months, a worsening jobs market is a reminder that efforts to rein in investment and production could in fact hurt employment and consumption in the absence of measures to boost demand at home.<\/p>\n
The country needs to create quality jobs for its youths or risk more entrenched weakness in consumption, according to Lynn Song, chief Greater China economist at ING Bank NV.<\/p>\n
\u201cThere should also be ramped-up support to encourage hiring,\u201d he said. \u201cProlonged unemployment in early stages risks a lost generation when it comes to future spending potential, which would certainly hinder efforts to move to a consumption driven economy,\u201d<\/p>\n
(Updates with economist comment in seventh paragraph.)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"An employee on the production line at a facility in Jiuquan, Gansu province, China. (Bloomberg) — China\u2019s labor…\n","protected":false},"author":2,"featured_media":81773,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[4932,14229,79,54750,33535,381,179,18,42299,19,17,5814,54752,54749,2297,54751],"class_list":{"0":"post-81772","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bloomberg","9":"tag-bloomberg-news","10":"tag-business","11":"tag-cheung-kong-graduate-school-of-business","12":"tag-chief-economist","13":"tag-china","14":"tag-economy","15":"tag-eire","16":"tag-greater-china","17":"tag-ie","18":"tag-ireland","19":"tag-labor-market","20":"tag-private-companies","21":"tag-raymond-yeung","22":"tag-unemployment","23":"tag-unemployment-insurance"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/81772","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=81772"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/81772\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/81773"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=81772"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=81772"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=81772"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}