BEIJING • China's unemployment rate has steadily dropped from last year's Covid-19 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 last month, official data showed last week, but unemployment for those between 16 and 24 - which captures graduates from school and college - was more than double that, at 13.8 per cent.
Anecdotal reports suggest a mismatch between jobs and skills, which could prevent the jobless rate from falling much further.
Part of the reason is China's unbalanced economic growth since the pandemic, with the services sectors - 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 Mr 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 firms 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.
About 14 million people are expected to enter the urban workforce this year, of which 9.09 million are graduates, the National Bureau of Statistics (NBS) said last week. China has a full-year target to add over 11 million urban jobs.
"The phenomenon of fresh graduates struggling to find jobs and companies having difficulties to recruit workers exist at the same time," NBS spokesman Fu Linghui 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 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 skills training on the job.
"Rebalancing, from investment to consumption and from manufacturing to services, has stalled since Covid-19 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 Mr Roache.
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 earlier this month. The authorities also vowed to expand jobs for college graduates, provide better career counselling services and facilitate information flow between job seekers and employers.
"The overall jobs pressure is still there," Mr 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 over 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 this year, 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.
BLOOMBERG
