It has always been a challenge to dissect the job market in China given scarce data and this is even so under the backdrop of COVID-19. In this report, we try to combine evidence from multiple aspects and gauge what industries, firms or populations are likely to suffer greater levels of job displacement.
Although the outbreak of COVID-19 has gradually been contained in China, the road ahead is still riddled with formidable challenges pertaining to the virus’ aftershocks on job creation, wage growth and consumption. The good news is that, both governments and corporates are beefing up efforts to safeguard jobs and create new posts. Efforts, often play a decisive role getting through hardship.
- COVID-19 took a toll on employment; marginal improvement in Mar. In 1Q20, employed population in urban areas added 2.29 million vs. 3.24 million in 1Q19. Surveyed unemployment rate recorded 5.9% in Mar, edging down 0.3ppt from Feb peak. Real disposable income decreased 3.9% YoY. Recruitment demand, measured by job posts on zhaopin.com, shrank 27% in 1Q20, before climbing back in Apr.
- …but still formidable challenges ahead. Rather than tightening of labor market, we think the marginal improvement in Mar was more a result of alleviating frictional unemployment as stringent travel restrictions gradually unwound and workers returned.
- What industries and firms are likely to suffer most? We are most concerned about the service sector, because it i) experienced slower pace of recovery; ii) accounted for the majority of job increase in urban areas; iii) was dominated by non-SOE firms. We also worry about export-oriented manufacturing firms, which are suffering from global demand plunge as well as the ongoing US-China tensions. In addition, we expect softer job market with respect to private firms, foreign firms and JVs than SOEs.
- Policy actions to prioritize employment, including, 1) Reducing burdens for firms via cutting tax payments and fees, postponing social security contributions etc. 2) Creating more jobs in the public sector, SOEs, etc.; 3) Ensuring social security to those in need; 4) Specifying support for most affected populations, such as migrant workers and college graduates.
- More on policy suggestions. 1) Extend job support to workers in consumer-facing service industries and export-oriented manufacturing, those who work for non-SOE firms, and those with lower income and less work experience. 2) Prepare workers for new skills or jobs via professional training because aftershocks such as digitization of the economy and US-China tensions could lead to permanent job loss to robots and to ASEAN counterparts. 3) Nurture burgeoning sectors that create future jobs.