China Youth Unemployment High and Rising
China’s coronavirus lockdowns weren’t good for the economy, but nearly everyone who had an optimistic view of “reopening” forgot that China reopened in the summer of 2020.
Yes, lockdowns returned with virus cases. Yes, the ongoing lockdown policy damaged economic output (but curiously not exports…). Still, the lockdowns were localized and case-based. As I speculated by looking at their ramping exports amid supposed lockdowns, along with estimates showing covid testing might be accounting for a huge portion of GDP growth, the lockdowns were a convenient-yet-false explanation for an ongoing slowdown.
Unemployment has been stubbornly high. Anecdotal, but I know experienced people who have been out of work for two years in Beijing. They never had trouble finding a job before. Youth unemployment is also extremely high. A chart in the article below also shows the lockdowns didn’t really spike unemployment. It was in an uptrend before the virus and remained in that uptrend, with volatility.
The jobless rate for the 16-24 age group has gradually climbed since 2020 and hit new highs over the past two months, posing a challenge to Beijing’s post-coronavirus recovery efforts.
And judging from seasonal trends, the youth unemployment rate is expected to rise further in July and August, with a record 11.58 million university graduates set to leave campus.
…In May, the jobless rate for the 16-24 age group hit a record of 20.8 per cent, up from the previous high of 20.4 per cent in April. The overall urban surveyed jobless rate, however, remained unchanged from April at 5.2 per cent last month.
Despite the record figure, National Bureau of Statistics spokesman Fu Linghui claimed last week that “some people have been misunderstanding the overall volume of our numbers”.
He noted that only 33 million of the 96 million people in the 16-24 age group are currently in a position to be employed, as many are students. And among those 33 million, he said, around a fifth have been unable to find work.
The latter point is valid, but it’s still negative for the economy. It’s good for society if young people are kept busy. It’s good for society if they are being made more productive by education, instead of being made unemployable via indoctrination in the United States. Still, a plot of the population percentage with tertiary education plotted along with real GDP growth inverted, shows a positive correlation. Extended education is evidence of slow economic growth and it heralds slower growth because it helps fuel delayed family formation.
Extended education can be an externality of wealth and development, such as in the United States, but it doesn’t reflect a rapidly growing economy. Aside from value investors looking for discounted assets, almost everyone with a bullish outlook on China is imagining some acceleration in economic growth that hasn’t been in evidence in a long time. If we ignore the stimulus growth post-2008, China’s growth peaked in 2007 and has been steadily slowing ever since. Again, not necessarily bad if measured by GDP per capita, but not the type of growth assumed in optimistic models of, e.g., future copper demand.
青年人“失业”自救:执着考公考研,主动延迟毕业
An important reason for the current high youth unemployment rate is that the main industries that used to absorb college students for employment, such as platform companies, finance, real estate, business services, culture, and medical care, have experienced a slowdown in industry expansion, especially private enterprises. Non-state-owned educational, health, cultural and social organizations have lost 1.15 million jobs in the past two years
Li Shi, a professor at Zhejiang University and the dean of the Sharing and Development Research Institute, told the Caijing reporter that the slow recovery of the current macro economy and insufficient demand for labor force are the key reasons for youth's employment difficulties. Under the downward pressure of the economy, companies recruit conservatively or even reduce their recruitment. Due to lack of work experience, young people are hit the hardest and are the most vulnerable compared to adults.
This anecdote helps place the economy in context:
Zhang Yumeng, who is about to graduate, is still submitting resumes. Zhang Yumeng told the Caijing reporter that when she graduated from undergraduate in 2020, she had already received an offer from a top 500 private enterprise in China, but instead of going, she chose to continue her graduate studies at a university in central China, but she did not expect to be a graduate student three years later. She has a degree but has yet to find a job.
Compared with three years ago, the number of companies recruiting this year has decreased a lot. Although Zhang Yumeng received an offer from a small company during her postgraduate study in accounting, she still doesn't want to go. "I didn't expect that after finishing the graduate school, I couldn't find the same job as when I was an undergraduate."
The reporter of Caijing learned that, in addition to taking public and postgraduate entrance examinations, more and more college students take the initiative to choose "postponing graduation" to cope with employment pressure.
Recently, "postponing graduation" has become a hot topic, and the topic of "a group of 985 graduates choose to take the initiative to postpone graduation" even rushed to the Internet hot search. As of June 19, the topic "Yanbi" on Xiaohongshu has had 27.488 million views. Enter the word "Yanbi" in the search box, and related searches for "Yanbi benefits" are also linked to the top.
In recent years, the rate of non-scheduled graduate students is on the rise. According to statistics released by the Ministry of Education, from 2016 to 2021, the non-scheduled graduation rate of junior college and undergraduate graduates rose from 2.93% to 3.22%, and the non-scheduled graduation rate of master’s and doctoral students rose from 21.14% to 24.21%. .
In the past, delaying graduation was often associated with negative words such as failing courses and being rejected for papers, which was considered to be the result of poor learning ability of college students. Nowadays, in order to retain the status of fresh graduates and extend the employment window period, postponing graduation has become a choice for college students to deal with employment difficulties.
Listed companies in China have cut their headcount by 11.9 percent on average from their 2018 levels.
It is understood that before the epidemic, the average number of employees of China's A-share listed companies fluctuated between 6,500 and 6,600. In 2018, the average number was 6,560, but in 2022, this number has dropped to 5,775, a drop of 11.9%. According to expert analysis, the benefits of listed companies are often better than those of unlisted companies, so the layoff rate of other companies may be higher.
Many companies disappeared during the lockdowns:
Last year, 215,000 small and medium-sized enterprises were deregistered in Shanghai, accounting for 19.9% of the total, more than four times the number in 2018; 94,000 small and micro enterprises were deregistered in Guangzhou, accounting for 13% of the total, which is 6 times higher than in 2018.
"In the past three years, many companies have been hollowed out, and many companies and industries have not recovered yet."
China peaked after the 2008 stimulus wore off. I started blogging heavily then because the Chinese government and media were very clear in saying no stimulus was coming. China was headed for a slowdown, but most Western media was saying new stimulus was coming because they were singing the tune then-dominant companies such as iron ore producers. China’s GDP would grow 10 percent per year, forever! Instead of rising commodity prices, it marked a peak in commodities that wasn’t exceeded until the whole world went as insane with stimulus as China did in 2008.
Slow Moving Depression
Heading into late summer 2019, it looked like the U.S. stock market was peaking. The Federal Reserve began emergency repo operations—stealth QE—in September 2019. The pandemic created an excuse for monster stimulus along with a convenient explanation for why the economy went into the dumpster.
My theory is that in hindsight, economic historians will rebrand this period as the depression-delayed. An interlude caused by massive stimulus and horrifically bad government policy that made the depression all the worse, deeper and longer than it would have been otherwise. If that’s correct, what’s going on in China isn’t surprising. What’s surprising is how much the world seems to be ignoring it, but maybe that’s because the effects of stimulus in the U.S. haven’t fully worn off yet. Maybe it’s because the U.S. is running its largest deficit outside of war or recession (or lockdowns). Shown below along with the Wilshire 5000.
Maybe it won’t be long before that stimulus has fully worn off.