Xi who must keep you employed This man is in charge of China. Like, really in charge: And he wants to make sure everyone he's in charge of remains nice and calm. So he'd like them kept busy. That, for the most part, means they should be working - call it a social compact or call it a security measure, it doesn't really matter. As JCapital's Anne Stevenson-Yang puts it: The reality of employment in China is that no one actually counts it, and the popular idea that the Chinese nomenklatura worries day in and day out about creating jobs is simply false. Employment in China is about social security with an emphasis on "security," Communist style. For the Chinese bureaucracy, the general population is not so much employed or unemployed as inside or outside the system. People outside the system are a security concern, not an economic concern, because, without the supervisory role of a State-owned employer there is no one keeping tabs on people to make sure they do not join a protest, have an extra child, leave home and create an urban slum in another locality, or, God forbid, go to the capital to seek redress for something, thus bringing political ire raining down on the hometown authorities. And that fear of social upheaval is especially true at the moment as China rebalances its economy away from investment and towards consumption. *obligatory "probably" to be assumed where appropriate, ta* In so doing the more likely scenarios involve some sort of surge in unemployment even if, due to the nature of the rebalancing away from corporate cosseting, the household sector will, in the words of Pettis, "bear less that its share of the contraction of growth." If one was to view it as the more practical side of the corruption crackdown - aimed at removing political blocks in the way of reform while re-establishing the party as China's moral guide - we'd argue you wouldn't be far off. The point is that in order to stop pesky social unrest as the economy shifts (be it during a rebalancing of merely as growth slows in the absence of a plan) China needs to keep its people employed. Not that controversial a statement we grant you but considering the nature of China's command-structure it seems all the more urgent over there. And creating jobs via the state in a slowing economy, while not actually hard, will have obvious negative effects. From ASY again: Historically, the way "new jobs" are created was by mandating State-owned firms to take on a certain number of people, essentially making social security payments, which then may be either dispensed directly by the SOE as a "stay home and get paid" program or used by a given locality to support the unemployed if needed, and this pattern has reemerged in these times of economic stress. Back in the fat days of 15% nominal growth, authorities did not need to concern themselves much with creating jobs; unemployed people would soon enough find an income someplace in the gray or private economy. Now, as the economy nosedives and options contract, the focus on employment as a surveillance tool will hurt China economically. At best, the reaction to a weakening employment picture will be to push jobs toward the State sector and increasingly undermine private industry. Inevitably, it will continue the stall in productivity growth that has emerged over the last two years. An equally obvious corollary to that point is that, for all the talk of China needing to keep its masses happy as it rebalances (fine and correct), there is no simple connection between a particular level of GDP growth and a level of employment. For one thing, any assumption that employment is targeted in a serious way by public officials runs into a wall of venality and the idea that although it is a part of the ratings system for public officials it reportedly comes below a raft of others - fixed asset investment, tax, etc. (And cremation, apparently. Colour us skeptical) Here, by way of underlining that point, is ASY once more on the various ways of, poorly, measuring employment in China: Unemployment: A count of urban job seekers who have registered with a local unemployment agency. It excludes migrant workers, retirees from the State sector who are seeking new employment, foreign employees, and men over the age of 50 and women over 45. Data used to calculate the figure are not public. Urban and rural employment: This statistic is given as a number of people employed in the formal sector by province. There is no corresponding data on the size of the urban population. The number is collected by three bureaucracies: the National Bureau of Statistics for State and foreign company workers; the State Administration of Industry and Commerce for private companies, and the Ministry of Agriculture for "township and village enterprises," a category of small rural enterprise with blurred ownership. One of the many distortions in this category of statistic is introduced by phantom or no-show jobs that SOEs are sometimes asked to create to support local government agendas. Number of newly employed in urban areas: This number is provided by the MOHRSS. Interestingly, the government macro-economic agency, the NDRC already provided the number for year-end 2014, suggesting that the statistic may be closer to a target, perhaps based on the expected effects of planned capital investment, rather than an analytic result from data. Number of reemployed in urban areas: Since the SOE restructuring of 1998, localities have had reemployment centers tasked with providing training and placement services to people laid off from the States sector. The re-employment numbers probably come from these centers. Sector employment: China reports on the number of people employed in key sectors by province. This number is collected via an administrative count of registered companies that report their number of employees. Number of job seekers: This number is based on bottom-up administrative reports from 114 cities, as described by the MOHRSS. Wages of employed persons: Companies are required to pay taxes and benefits on behalf of formally employed staff, so MOHRSS has real-time information on salary levels, which are reported when tax payments are made. However, even much of formal employment occurs outside of the social security system; construction workers, migrant workers in the service sector of cities across the country, temporary workers at factories, and many other categories are not formally entered into the books. The various reporting systems are State-system legacies with a few appendages, like "re- employment," that grew out of policy changes in the 1990s. The statistics fail to comprehend China's newly heterogeneous economic structure, encompassing everything from entrepreneurship to real estate and other investment activities to off-the-record service jobs So yeah, not too clever. Which is useful if you want to keep your employment stats on a permanent upward trajectory. As ASY said: It is not surprising, given the number of bureaucracies allegedly reporting employment numbers and their various incentives to count one way or another, that numbers from different series don't match. For example, in the economically challenging year of 2008, MOHRSS announced that 9.36 million jobs had been created in the first three quarters. But statistics from those quarters show a net addition of 3.2 mln jobs. The growth in the statistic showing the number of unemployed people shows much more volatility than does the unemployment rate, going from negative 2% to positive 11% growth in various quarters, and yet the range in the unemployment rate is only 4.0 to 4.2%. Overall, the unemployment rate has been essentially unchanged, at 4%, since 2003, when China began publishing the statistic. Likewise, the series on the number of people seeking jobs is highly volatile, with annual growth ranging from negative 14% to 104% in some quarters. The wage growth shown for migrant workers from different series by the same ministry is very different. This is all against the demographics, which should indicate a decline in the number of employable people as more Chinese enter the uncounted age levels. And so we come back to the need for employment as a tool of social stability and the idea that if your system is predicated on security - and employment is a way to achieve that - then measuring employment accurately is rendered less important the calmer the system is. And if one looks at measures such as the demand - supply ratio below you can see that, from a Chinese government point of view, everything looks rosy. The graph shows the ratio of job opportunities to job seekers in China's labor market. The ratio stood at 1.11 by Q2 2014, meaning that for every 100 job seekers there are 111 job vacancies available. Basically it shows a quite tight labour market consistent with anecdotal stories and, very arguably, a low chance of social unrest. Hat-tip to Deutshce's new chief China economist Zhiwei Zhang for helping a blogger out with the supply-demand data btw But, as your final ASY chunk says, all of the above very much underlines the fragility of the system: What is entirely missing from the Chinese system is a means of targeting high-level economic goals rather than ministry-driven bureaucratic targets. The intertwined interests of the Party, the State-owned enterprises, and the administrative bureaucracies account for the stubborn classification of economic activity as State-owned, Private, and Foreign Invested. Of much less interest are key economic measures more familiar in mature economies, such as productivity gains and employment. Employment, under employment, and unemployment remain inherently difficult to measure in China's vast, hybridized economy, in which a remarkable number of urban and rural residences devise ways to generate cash flow, with or without actual reported jobs. And as long as the emphasis in social security administration is on "security," incentives to develop an accurate picture of employment will remain weak. Different bureaucracies are charged with keeping people off the streets, supplying social security benefits, and keeping tabs on workers, but no one has a full-employment portfolio, nor does the bureaucracy have the tools to know when unemployment has become a serious economic problem. Exporters to and investors in China will know sooner than General Secretary Xi Jinping when the Chinese people have little money left to spend. In this way, China's government is becoming trapped within its own good news machine. Related links: Regressing to the mean in China or why if something cannot go on forever, it will stop - FT Alphaville Of Xi's material world - FT Alphaville