Tuesday, February 03, 2009

Unemployment in China...Oh Boy

Oops, forgot to post this from RGE Monitor. Incidentally, a reader commented on RGE that 35+ million is only 2% of China's population. But that's not how unemployment is calculated anywhere! Official total urban labor force was 293 million at year-end 2007, meaning around 300 million at year-end 2008. We can add 130 million for total migrant population, so the total urban labor force including migrant labor would be 430 million. You can do the math here on unemployment rate then if 35 million are unemployed, over 8%.

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Victor Shih | Feb 2, 2009

In a press conference today, the vice head of the office of the Central Finance and Economic Leading Group (see this paper for what this organization is--it's powerful) Chen Xiwen revealed some important figures on unemployment. In a previous post, I speculated on an unemployment figure that was 35 million by the end of first quarter of 2009. According to confirmed figures, we have already surpassed that figure. For the sake of completeness, I translate the relevant passages verbatim:

Chen Xiwen: Not long ago, the Ministry of Agriculture organized a survey which drew samples from 150 villages located in 15 provinces which exported more rural labor. The sample focused on the approximately 38.5% of rural labor who returned home before the lunar new year. Of those who returned home, some 60.4% were home on regular visits to their family. That is to say that their jobs in the cities are still preserved, and they will return to their jobs after the holiday. Of those who returned home, 39.6% of the respondents reported that they lost their jobs or have not found a job, thus returning home. According to these figures, of the 130 million rural labor who are working elsewhere, we think 15.3% in total have lost their jobs or have not found employment (in cities). According to the ratio of 15.3%, we can calculate that out of the 130 million of rural labor working elsewhere, approximately 20 million of them have lost their jobs or have not found employment due to economic unwellness.

My estimate of migrant unemployment was based on a higher figure for the total migrant population, which caused me to overshoot on migrant unemployment. There are some quibbles on this issue because how far do you have to travel away from your native village before you are considered "migrant." Nonetheless, as of this point, based entirely on official estimates and figures, we have 20 million unemployed migrant labor plus 1.8 million unemployed college graduates from 2008. In addition, there are around 15 million or so in registered urban unemployed (this means they are not migrant workers, but residents in major cities). Thus, in total, official figures already reflect an unemployed force of 36.8 million.

To be honest, I never thought we would reach these figures so soon, considering that these figures are based on data collected before the middle of January. I was thinking that we would reach this point after the lunar new year. Now, additional number of migrants who either stayed in cities or returned home will soon find themselves unemployed. In addition, even relatively secure urban jobs (retail, services) may begin to disappear as the impact of the export slow-down hit the service sector. Thus, we may see an unemployed force of 50 million much sooner than the end of 2009, as I previously predicted. There have been no real policy responses so far, except for marginal moves like cheaper consumer electronics in the countryside and passing out some payments to unemployed college graduates. Up until this press conference, the official Chinese government line has been that if migrant workers return home, then they are not "unemployed" per se since they can work the land. This attitude of course ignored the fact that income per capita and productivity both decline if young people stay home, not to mention frustrated expectation. Given more mouths to feed, how are they suppose to buy flat-screen TVs, even if 20% discounted! At least the government now acknowledges this as a problem, which is an important step. We will see what they do in response now.

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