China’s youth unemployment rate rose above 20 percent for the first time since the government started tracking the data five years ago, another sign of uncertainty surrounding the country’s economic recovery.
But the most eye-catching statistic was the surveyed unemployment rate for China’s 16-24 labor force in April at 20.4%, a record high. The figure was 16.7% at the end of last year.
The data suggest that while China’s economic recovery is on track, it remains highly uneven, with some people being left out and the sustainability of the recovery being questioned.
So far, the recovery has been largely fueled by a surge in pent-up demand for travel, dining out and other services after China lifted nearly three years of strict containment measures late last year.
Economists are paying particular attention to the state of the labor market, which is an important determinant of consumer confidence after three years of epidemic containment measures and travel restrictions have dampened people’s willingness to go out and spend.
Persistently high unemployment among younger generations has also fueled concerns about social instability at home as tensions between China and Western countries led by the United States have intensified. China’s youth unemployment rate has been two to three times higher than the national urban survey unemployment rate and has not fallen below 15% since late 2021.
The weakening momentum in China’s economy has also heightened concerns that the world may not be able to count on China’s reopening to deliver much, as banking turmoil, sticky inflation and the lingering fallout from the Russo-Ukrainian war continue to weigh on advanced economies around the world. Great support.
While many economists have recently raised their forecasts for China’s economic growth for the full year to nearly 6 percent this year, surpassing the roughly 5 percent growth target set by government policymakers in March, they have expressed doubts about whether Beijing will Divided on a rate cut in the near term.
Lu Ting, chief China economist at Nomura, told clients in a research note on Tuesday that the risk of a downward spiral in China had risen, predicting that benchmark lending rates could be cut in the second half of this year.
Tommy Wu, an economist at Commerzbank, said the weaker-than-expected economic report opened the door for further policy easing at a time when China’s economy faces a slack labor market and rising risks of deflation.
Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, said that while China may use some stimulus, the central bank may have to hold off on plans to ease monetary policy, partly because of concerns Asset bubbles inflate. The weaker-than-expected data released on Tuesday showed how difficult it is to keep the growth engine running after restarting it, Pang said.
On Monday, the People’s Bank of China kept interest rates unchanged for the ninth straight month. Meanwhile, the central bank issued a statement saying that China was not experiencing deflation, although it acknowledged weak demand was keeping inflation low.
The People’s Bank of China stated that the “scar effect” of the new crown epidemic has not subsided, residents’ income expectations are still recovering, young people are under greater employment pressure, and the sustainability of consumption recovery momentum is facing challenges.
Excitement sparked by the government’s abrupt lifting of strict coronavirus-prevention rules late last year led to a surge in spending on services. But in April, the services spending spree appeared to have run out of steam.
Although the total retail sales of social consumer goods, which represents the consumption situation, surged by 18.4% year-on-year in April, such a high growth rate was mainly due to the low comparison base in the same period last year. confidence of consumers across the country.
The result was also lower than the 20.5% growth forecast by economists polled by The Wall Street Journal. According to the National Bureau of Statistics of China, the total retail sales of consumer goods in April increased by only 0.5% month-on-month.
Spending on services has been the main driver of the recovery, while spending on goods has lagged. Data on Tuesday showed that split continued in April, with sales of household appliances, furniture and other goods remaining subdued, while consumption in the restaurant industry continued to gain momentum.
Factory activity also disappointed, with industrial production falling 0.5% month-on-month in April, reflecting weak export demand as retailers in Western countries cut new orders amid rising inflation.
Growth in fixed-asset investment, which includes manufacturing, real estate and infrastructure, unexpectedly slowed in April, with private fixed-asset investment rising just 0.4% in the first four months of this year, a further slowdown from last year’s meager 0.9% growth rate.
From January to April this year, the national fixed asset investment excluding rural households increased by 4.7% year-on-year, a slowdown from 5.1% in January-March, and also lower than the 5.3% expected by economists surveyed by the Wall Street Journal. speed up.
The real estate sector continues to be a drag on the economy, with the sector suffering a sharp pullback through most of 2022. From January to April this year, the national real estate development investment fell by 6.2% year-on-year, and the decline was wider than the 5.8% drop in the first quarter.
In the labor market, China’s urban surveyed unemployment rate fell for the third straight month, falling to 5.2% in April, the lowest level since late 2021. However, Louise Loo, a China economist at Oxford Economics, said the good news was overshadowed by a fourth straight month of rising youth unemployment. Before the pandemic, youth made up nearly 40 percent of employment in the services sector.
Lu Zihui said that to some extent, we believe that the economic recovery is driven by the service industry, but the fact that the youth unemployment rate has reached 20% does indicate that this recovery momentum will not last.
Fu Linghui, a spokesman for China’s National Bureau of Statistics, said on Tuesday that the number of college graduates this summer may hit a new high, and that “continued efforts are still needed to stabilize and expand youth employment.”
In Beijing, Yao Jiaoqing quit her job as a barista at a cafe last month because she could no longer bear the drudgery that paid less than 3,000 yuan ($431) a month.
“Over the years, I’ve been asking myself, ‘Why do we work?'” said Yao, who has worked in different jobs in the telecommunications and online travel industries since graduating from university in 2018. Yao, 27, said her previous “small roles” as an accountant at large companies were exhausting and she quit those jobs. She was attracted to a job in a coffee shop because there was no need for overtime.
Yao said her peers are estimated to have a higher unemployment rate than official figures suggest.
Looking at friends of similar age around her, about a third of them are currently unemployed, Yao said. She said she just wanted to lie flat. Lying flat is a popular internet term, which roughly means to withdraw from the fierce competition for fame and fortune.