Sunday, December 5, 2010

China Jobs Market - Going Gangbusters?

I just came across a copy of the latest Manpower employment outlook report (pdf) for China - a unique and interesting data point given the relative lack of official employment statistics. And from my reading it looks like the job market of Zhong Guo is going gangbusters.

"In Quarter 4 2010, Chinese employers anticipate the most dynamic labor market since the survey began in Quarter 2 2005. With 53% of employers expecting to increase staffing levels, 2% forecasting a decrease and 32% predicting no change, the Net Employment Outlook stands at +51%."

The survey results are relatively extraordinary, indeed to some extent given the pattern on the chart below you may be tempted to call bullplop, but it is a very interesting metric from an analysis of the economic fundamentals point of view. A surface level analysis says it points to a very strong Chinese economy, of course the flipside could be that it points to an overheating economy.

So of course the next question is 'where are the jobs coming from?' what industry or industries could be behind the almost euphoric rise in hiring intentions? The chart below shows that it's relatively broad-based, but the standouts are "Finance, Insurance & Real Estate" and "Services".

On the first one; Finance - ok that's understandable, lending growth has been through the roof so of course banks need people to take care of all the things like lending, admin, collections, etc; Insurance - yup, that's fair, China is an emerging market in terms of insurance, underinsured by most standards; Real Estate - the main culprit? this one's surely a no-brainer given the recent (over?)investment trends underway in real estate, and that real estate does about 9% of GDP, and that there are property bubbles in SOME BUT NOT ALL parts of China.

And services, well sure why not, everyone needs services right? So under a rough tyre-kicking the results seem like they might stack-up. Isn't that interesting? It just shows you how hard an economic beast China is to analyse and understand, but onto the next logical question; what does it all mean? (so what?)

As noted at the start huge hiring intentions are great as a sign of the fundamental strength of an economy. More people with jobs means an eventual boost to the domestic demand aspect of GDP. And in a country like China more jobs means more stability amongst the populace - the last thing the Chinese government wants is a throng of unemployed (like the US has). So on the economic growth and stability front this is great!

But of course there's no free lunch in economics - the price of this euphoric job growth could be greater inflation (and the associated nasty flow on effects it would have). Obviously if hiring goes up then competition for skilled labor goes up, wages go up, wage increases get passed onto the consumer (usually), workers demand higher wages because of higher prices, and then the PBOC smashes the inflation out of the system.

OK so that may be a bit dramatic, but the point is that the risk of inflation goes up, and the risk of over-zealous monetary policy measures rises. So, ah, the bottom line is: grand hiring intentions is great, good for growth, good for stability, but almost surely comes with the risk of higher inflation...

Econ Grapher Analytics

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