What is China’s Unemployment Rate?

by on August 19, 2015 at 7:28 am in Current Affairs, Data Source, Economics, Political Science | Permalink

What is China’s Unemployment Rate? 4.1% For what month, what year? Doesn’t matter the answer is still 4.1%. That’s a slight exaggeration but for the last 3 years the unemployment rate has been 4.1% almost every month. Indeed, since 2002 the official unemployment rate has varied between 3.9% and 4.3%, an absurdly smooth series.

In contrast to the unemployment rate, China’s GDP growth rate has had massive swings. As a piece in Quartz puts it the unemployment rate exhibits an eerie stillness.

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A new NBER working paper uses a newly available household survey and finds a very different series–the China-UHS series shown in black below. According to these estimates China’s unemployment rate shot up to around 11% in 2002 and has been nearly that high at least until 2009 when unfortunately the new series ends.

UE Rate China

So how high is Chinese unemployment today? No one knows but it could well be closer to 10% than to 4.1%.

Keep an eye on China and don’t be surprised by the unexpected. In China it’s not just the unemployment rate that is more volatile than it appears.

1 leppa August 19, 2015 at 8:02 am

The choice of 4.1% rather than 4% reminds me of the possibly apocryphal story of the guy who first measured the height of Mt.Everest. He arrived at 29,000 ft but fearing that no one would believe him changed it to 29,002 ft.

2 Todd August 19, 2015 at 9:20 am

He knew he’d eventually be right.

3 rayward August 19, 2015 at 8:07 am

My Godson (age 17) interned (at a university) in China this summer. He speaks fluent Mandarin, which was helpful since nobody spoke English where he worked: his main job was to translate documents, English to Mandarin and Mandarin to English (he’s obviously not the ordinary teenager). I spent last week with him and asked him all kinds of questions about his experience in order to get a sense of what life is like in China – or life in a university. He told me lots of interesting things, but it’s something odd that I want to repeat here. I asked him where the people who worked at the university ate their meals, and he indicated that the campus (an urban campus, meaning it goes up more than out) had a dining room for faculty and staff and that the food was good so he ate most of his meals there (he lived in the dorm for visiting staff). I then asked if he made many friends in the dining room, since he spent so much time there and at roughly the same times every day. His answer: while the dining room was always nearly full, he never saw the same people twice, so no, he didn’t make friends at the dining room. This is a university, so one would expect a collegial bunch, spending time together in the dining room discussing ideas, comparing research, being sociable among colleagues. No. I couldn’t help but think about Google and similar places in the U.S., where the dining room (or common area for the employees) is a magnet, bringing together the employees so they can discuss ideas, compare research, and be sociable among colleagues. Why the difference? And where did they go every day? [I should mention that one doesn’t eat just anywhere in China, a lesson my Godson learned the hard way.]

4 er August 19, 2015 at 8:49 am

chinese universities are about signalling.

5 Anon August 19, 2015 at 9:13 am

Which universities aren’t?

6 anon August 19, 2015 at 12:58 pm

Most of them in the US are about both learning and signaling. At least at the top schools, learning is very important.

7 Ray Lopez August 19, 2015 at 10:44 am

Something ain’t right about this story of yours Rayward. I think your “Godson” is pulling your leg, or perhaps he’s just inattentive to his surroundings.

8 msgkings August 19, 2015 at 1:49 pm

Ray puts “Godson” in quotes but not “girlfriend”

9 Hao Chen August 19, 2015 at 4:03 pm

I am from China and I spent my 4 undergraduate years there before came to North America. It is true that most Chinese colleges and universities have dinner rooms, or dinner halls as they are so big that they can serve hundreds of people at the same time. They only open at the meal times, roughly two hours for each meal, and is not regard as a place for social activities. There are no sofa. It kinds of like the dinner halls in prisons or military camps, with a little more freedom. People usually went to the dinning halls with there friend and classmates. But you are not likely to find new friends there.

10 Peldrigal August 20, 2015 at 8:46 pm

I did my undergraduate years in Italy. I have never spoken to a person that I did not already know in the university dining hall. And seeing how USA college students are socially crippled on average, I sincerely doubt that they would be more sociable than Italians.

11 yo August 19, 2015 at 8:31 am

Unemployment is frequently a meaningless concept in developing countries, as informal employment often (partly) offsets the large formal numbers. And if it’s a metric by which people get measured, you can wholly expect them to cook the books as long as they like. Sometimes the administration needs high unemployment (“please help us”) and sometimes it needs low unemployment (“all is for the best in the best of possible worlds”) or outright non-measurement (costs money to measure, so some high ranking government dude (it’s always a dude) comes up with an “estimate”)

12 FC August 19, 2015 at 11:12 am

My favorite is “The goals of the five year plan have been achieved in three years.”

13 8 August 19, 2015 at 9:13 am

Under employment must be extensive. A lot of low end consumer businesses (restaurants, hairdressers, shops) have more staff than necessary. A lot of people are still farmers or “farmers.” Forced retirement at the age of 55 for women and 60 for men also creates under employment. Is someone who owns an unregistered apartment in Beijing and collects a monthly rent higher that entry level salaries unemployed? Technically yes, but they aren’t hurting.

I’m still more worried about the currency, albeit worried in a Soros kind of way.

14 Bob from Ohio August 19, 2015 at 9:15 am

Chines official statistics are garbage? Who knew.

15 Ray Lopez August 19, 2015 at 10:46 am

I bet the GDP figures are also wrong. They probably are measuring just GDP in the big cities (HK region, Beijing region, Shanghai region, Chungking, Chendu regions, etc).

16 anon August 19, 2015 at 11:41 am

It’s good to remember that the Chinese themselves never refer to their unemployment as the total unemployment rate, only as the unemployment rate of registered workers. They don’t really claim anywhere that their number is good, they just only publish the BS number and don’t talk about real numbers. Therefore, no-one actually lies.

17 mulp August 19, 2015 at 12:55 pm

That was the basic point I was going to make. What fraction of workers in the factories are actually authorized to live and work in the district of the factory?

To put it in US terms, the high unemployment is caused by illegals.

Trump would have a field day.

18 Angus August 19, 2015 at 10:10 am

Scott Sumner pushback coming in 3, 2, 1…….

19 Ben Ryan August 19, 2015 at 10:21 am

These numbers are both 1) not reliable and 2) largely accurate from what I can tell.

China’s official unemployment statistics refer only to urban areas and only count those officially registered as unemployed (see http://www.ilo.org/ilostat). Unemployment as defined by by the U.S. Bureau of Labor Statistics and the ILO (which maintains an promulgates the international standards on these things) is actually activity based – during the reference period (typically one week) the respondent did no work at all for compensation and was not on temporary leave, but had actually been looking for work (typically at least sometime in the past four weeks) and would be able to begin work if it were offered. Based on this there are at least two big problems with the China data right off the bat. One, official unemployment registers are a very different metric than “real” unemployment. For example, there are many people in the U.S. who qualify for Unemployment (i.e., appear in the Unemployment claims numbers) who do not technically count as unemployed as per the the BLS/ILO definition because they did at least an hour of work in the past week for money. Two, urban unemployment usually exhibits very different patterns than rural unemployment. (The World Bank estimates China’s urban population at only 54% as of 2014.)

I’m not sure how exactly this UHS survey measures unemployment as I can’t locate that particular data, but considering that it also only focuses on urban areas and the series ends in 2009, it’s not necessarily out of line with findings from Gallup surveys done since that year. Gallup does annual full-country (minus Xinjiang and Tibet, ~2% of the population; overall these surveys typically have margins of error of about 2% based on n-sizes of 2500-4000 respondents.) surveys which measure unemployment among other metrics. These surveys find unemployment rates on par with the official statistics – 4.1% in 2013, 2.0% in 2014, etc. When you split the Gallup unemployment numbers by urbanicity, you do see urban unemployment higher in 2009 and 2010 (7% and 11% respectively) and then coming back down to 3-5% more recently, while rural unemployment has been steady at 2-4% since 2009.

What these surveys also show is that the full-time self-employed constitute about 1/3 of the adult population, which group includes farmers, street vendors, etc. This group is even larger in rural areas – 35-45% of adults – than in urban areas (10-20%). My guess would be that when these (largely rural) self-employed people are out of work they don’t spend a lot of time unemployed, or they and their families just starve.

20 Terminology August 19, 2015 at 10:50 am

If you really look at China’s “official unemployment rate” rather than using second hand information, you’ll know it’s explicitly called “registered unemployment rate”, i.e., you have to go to the government and register yourself as unemployed to be counted. Nobody including the Chinese government ever says it’s equal to China’s actual unemployment rate. OP and many commentators are laughable.

21 Robert Daniels August 19, 2015 at 12:07 pm

Can anyone shed some light on the fact that higher income countries have habitually higher level of unemployment than their poorer country counterparts? Does this have anything to do with more generous social welfare programs in richer nations?

22 Ben Ryan August 19, 2015 at 12:48 pm

Robert – actually, the Unemployment rate shows very little correlation with GDP per capita worldwide. That’s because the unemployment rate is determined by several different types of factors – the underlying health of the economy, the extent of and conditions on unemployment benefits, the rate of workforce participation, etc. So you have some high-income countries with high unemployment (many examples in Western Europe), some high-income countries with low unemployment (the Arab States of the Persian Gulf, for example), low-income countries with high unemployment (several former Yugoslavian republics), and low-income countries with low unemployment (many sub-Saharan African states).

If you want an employment metric that actually correlates with GDP per capita, look at “full-time employed for an employer (not self-employed).” There’s a good graph showing this relationship about one third of the way down this page: http://www.gallup.com/poll/175292/nearly-three-workers-worldwide-self-employed.aspx

23 Robert Daniels August 19, 2015 at 2:20 pm

The Gallup pole helps explain sub-Saharan African/ Caribbean/ South American countries. I didn’t take to consideration higher income European countries who have high unemployment rates that may skew the average. France and Italy come to mind as countries with strong unions with high unemployment rates. Thanks for the clarification!

24 NeqNeq August 19, 2015 at 12:09 pm

If nobody knows what the unemployment rate is, how can anyone say it “is more volatile than it appears”?

25 Dzhaughn August 19, 2015 at 4:09 pm

Because it appears to have zero volatility. Anti-volatility is not yet in Bernie Sander’s platform.

26 jorod August 19, 2015 at 1:18 pm

Really? We now estimate the unemployment rate of command economies? A socialist paradise dream come true.

27 Hao Chen August 19, 2015 at 4:16 pm

Unlike Westerners, Chinese people do not ask so much for government. Lack of unemployment insurance, they generally reguard finding jobs is their own duty. If they lost their jobs, they will try to be a server, a supermarket cashier, a cleaner, a Express Delivery person. There is no contracts, no union. As TheMoneyIllusion
blog said: “Yes, China has lots of inefficiencies, such as state-owned enterprises, but they also have a labor market that’s dramatically more flexible than any labor market in Southern Europe, and which provides reasonably full employment and fast rising wage rates.”

28 Todd Kreider August 19, 2015 at 4:39 pm

Japan’s unemployment rate was also eerily smooth at around 1.3% from 1960 to 1973 – in terms of GDP/capita(ppp), that is about where China has been in the last few years

http://www.tradingeconomics.com/japan/unemployment-rate

29 Jason Smith August 19, 2015 at 8:35 pm

I tried my hand at estimating the unemployment rate in China — I get agreement with the spike in the early 2000s, but there is a fall to 4 or 5% afterwards that continues until 2014. After that, no data on NGDP so I can’t tell what happens. Anyone have any sources?

http://informationtransfereconomics.blogspot.com/2015/08/the-chinese-unemployment-rate.html

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