A Looming Spectre: Rising Unemployment Threatens China's Economic Trajectory
China's economic rebound faces a growing obstacle – a resurgent tide of unemployment. Data released on Monday revealed a concerning trend: joblessness has risen for the third consecutive month, reaching 5.3%. This figure erases nearly half a year of progress, returning the unemployment rate to its July 2023 level.
While this news casts a shadow, it's not the only story in the data dump. Positive signs emerged in other areas, with industrial production experiencing a significant year-on-year surge in January and February. Additionally, investment in factories witnessed a healthy increase.
Economists interpret this data as a mixed bag. While the government's modest stimulus efforts appear to be having a positive effect, more substantial measures are likely needed to ensure a sustained recovery. "Complacency is a luxury China cannot afford at this juncture," warns Ting Lu, Chief China Economist at Nomura in Hong Kong.
Beyond the rising unemployment rate, another worrying trend emerges: a decline in average working hours. Economists often interpret this data point as a sign of underemployment, where individuals work significantly below their potential. This phenomenon compounds the unemployment issue, creating a broader picture of labor market weakness.
Youth unemployment, a persistent concern, reached a staggering 21% in June 2023. While the statistics agency initially stopped publishing data for this age group (16-24), citing methodological tweaks, it resumed reporting in January with a revised figure of 15% for December 2023. However, the agency now releases youth unemployment data separately, hindering a clear comparison with the broader jobless rate.
This compartmentalization of data underscores the pockets of weakness within the Chinese economy. While government support for manufacturing appears effective, subdued consumer spending and a protracted property slump continue to be major roadblocks.
Monday's data release confirmed this uneven recovery. Retail sales growth slowed in the first two months of 2024, while property investment continued to shrink. Conversely, industrial production and investment in infrastructure projects saw a positive rise.
"The latest unemployment figures are a cause for alarm," asserts Julian Evans-Pritchard, Head of China Economics at Capital Economics in Singapore. "Despite the generally positive tone of the data, it's clear that domestic consumption remains sluggish. The current growth is primarily driven by exports and state-funded investments."
China's economy managed to expand by 5.2% in 2023. Looking ahead, Chinese leaders set an ambitious growth target of 5% for 2024 during their annual gathering earlier this month. However, many economists consider this goal to be overly optimistic. Last year's performance benefited from a more favorable comparison to 2022's sharp growth slowdown due to stringent COVID-19 lockdowns.
China stands at a crossroads. While some sectors show signs of life, rising unemployment and a subdued domestic market threaten to derail the government's ambitious growth targets. Can China navigate these challenges and achieve sustained economic recovery? Only time will tell, but the current data paints a picture of a struggle for a balanced and robust rebound.
