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China’s urban jobless rate fell to a two-year low of 5 per cent in May, but the unemployment rate for recent graduates of high school and college was more than double that figure. Photo: Getty Images

China jobs: unemployment rate dips, but numbers mask structural problems keeping graduates out of work

  • Analysts point to several factors that are draining number of blue-collar workers
  • Anecdotal reports suggest a mismatch between jobs and skills in the economy, which could prevent jobless rate from falling further
China jobs

China’s unemployment rate has steadily dropped from last year’s pandemic peak, though a lack of jobs for graduates and a shortage of skilled manufacturing workers point to underlying problems in the labour market.

The urban jobless rate fell to a two-year low of 5 per cent in May, official data showed last week, but unemployment for those between the ages of 16 and 24 – which captures graduates from high school and college – was more than double that, at 13.8 per cent.

Anecdotal reports suggest a mismatch between jobs and skills in the economy, and this could prevent the jobless rate from falling much further. Part of the reason is China’s unbalanced economic growth since the pandemic, with services industries – which are more suited to graduate jobs – slower to recover than manufacturing.

“Exports and investment, including in heavy industries and real estate, are driving the rebound, but this demand does not create the type of jobs suited for many of today’s graduates,” said Shaun Roache, chief economist for Asia-Pacific at S&P Global Ratings.

The structural problem has persisted for much of this year. In a survey of 90,000 companies published by China’s statistics bureau in mid-April, about 44 per cent of industrial firms said recruitment of workers is their biggest obstacle, the highest level in recent years.

The National Bureau of Statistics (NBS) said last week that about 14 million people are expected to enter the urban workforce this year, of which 9.09 million are graduates. China has a full-year target to add more than 11 million urban jobs.

“The phenomenon of fresh graduates struggling to find jobs, and companies having difficulties recruiting workers, exist at the same time,” Fu Linghui, an NBS spokesman, said at the time.

The pandemic had driven many manufacturing workers, especially migrants, into the services industry. However, analysts also point to several longer-term factors that are draining the number of blue-collar workers: manufacturing jobs are not appealing to younger workers, the pay is generally lower and there is a lack of on-the-job skills training.

“Rebalancing, from investment to consumption and from manufacturing to services, has stalled since Covid, but it will need to resume for the economy to start generating enough well-paid, urban jobs for new job market entrants,” said S&P’s Roache.

The United States is also facing a problem of labour shortages, coupled with millions of unemployed people unable to find jobs. Federal Reserve chairman Jerome Powell cited the skills gap, as well as child care obligations and lingering virus fears, as possible reasons for that dichotomy.

China’s government is now stepping up its vocational skills training as a way to alleviate the structural problem in employment, with Premier Li Keqiang addressing the issue at a meeting earlier this month. Authorities also vowed to expand jobs for college graduates, provide better career-counselling services and facilitate information flow between jobseekers and employers.

“The overall jobs pressure is still there,” the NBS’s Fu said. “As the next step, we’ll need to maintain necessary support for the economic recovery, push for the creation of new jobs, implement a jobs-first policy and expand employment” for key groups of workers.

Beijing had set a target by the end of this year to train more than 50 million people – including migrant workers, high school graduates, furloughed workers and former soldiers – using government subsidies. Skilled workers should account for more than 25 per cent of the total workforce by the end of 2021, according to the plan.

With the labour force shrinking and getting older, China’s next phase of growth will need to come from productivity gains driven by improved skills and innovation, McKinsey Global Institute said in a report released in January. It estimates that, by 2030, about 220 million workers, or 30 per cent of the workforce, may need to move into higher-skilled jobs.