China’s tight job market defies economic downturn

Tuesday, 24 July 2012 00:55 -     - {{hitsCtrl.values.hits}}

Reuters: Workers living through the slowest run of global economic growth in more than three years are in fear for their jobs everywhere except in the very place investors are most concerned about - China.

Despite six straight quarters of slowing growth, there are more job vacancies in China than there have been for around a decade, giving workers the unlikely luxury of job-hopping during a downturn.

“It’s not that I am not happy in my current job, but everyone has the freedom to look for better opportunities and bigger companies to work for,” said Hu, an urban planner browsing a weekend jobs fair in north Beijing.

“I am 80 per cent satisfied with my job right now, but my ideal (monthly) pay after taxes is 20,000 yuan,” he said, declining to give his full name.

Skilled staff are in short supply as the world’s second largest economy has moved up the industrial value chain.

And even more fundamentally the country is working through the demographic shift wrought by the government’s decades-old one-child policy.

During the 2008/09 economic downturn, firms in the mainland let go staff, only to end up paying more to rehire when the economy rebounded sharply, reducing profits.

Learning from that lesson, firms this time are opting to cut hours rather than jobs.

While that means things could turn quickly worse if China’s export and output dip deepens, evidence from jobs fairs in Beijing and Shanghai suggests employees were looking for fresh windows of opportunity rather than battening down the hatches.

Hu was typical of over a dozen workers Reuters interviewed at the two fairs - looking to quit uninspiring or tiring jobs in favour of better prospects and the likelihood of more money.

Among the unemployed people at the fairs, most had just left school and had searched for work for less than two months.

Few felt the chill from the economic slowdown, or thought job prospects could be threatened, a perception backed up by data showing China’s urban labour to supply ratio has remained solidly above 1 for seven consecutive quarters - meaning there are more vacancies than there are people to fill them.

“If you are not picky about the company and the pay, it’s not hard to find a job,” said Arlene Zhu, a recent business graduate attending a job fair in Shanghai.

“I hope I can find a job in the next two weeks, all the better if the pay is above 2,500 yuan (a month).”

No compromises on pay

Official data shows China’s average annual wages in 2011 were 42,452 yuan in state-owned firms, 24,556 yuan in the private sector, 56,061 yuan in Beijing and 52,655 yuan in Shanghai. The government has decreed minimum wages should grow by an average of at least 13 per cent in the five years to 2015.

With home prices nationwide still hovering close to record levels - down just 3-4 per cent from all-time highs in Beijing and Shanghai, private sector data shows - workers say they cannot compromise on pay.

The no-nonsense approach to pay is one reason firms such as KFC parent Yum Brands Inc (YUM.N) are reporting quarterly profits that miss investor expectations, and blaming higher wage costs as a key reason for doing so.

Jobs are an especially crucial indicator in China, with the Communist Party hyper-sensitive to the risk of social upheaval that unemployment could pose to its one-party rule, particularly in the run-up to its once-a-decade leadership transition due later this year.

The last time an estimated 20 million Chinese factory workers were thrown out of work in a matter of months in late 2008, as the global financial crisis drove world trade to a near standstill, China unveiled a 4-trillion-yuan fiscal extravaganza to stabilise the economy and quell any social discontent.

And that makes nuances on jobs especially significant for investors, not least because since official unemployment data was first published in 2004 the rate has been largely static between 4-4.3 per cent, partly because it omits about 160 million rural migrant workers who are usually the first to be fired.

The situation is not as dire this time, said Stephen Green, an economist at Standard Chartered, pointing to surveys of manufacturers which show they are hiring, albeit less briskly, with the pace likely to ease further this year.

Still, that would leave China creating new jobs in 2012 on a net basis, Green said, to the relief of Beijing, which wants to absorb an average 7 million new graduates joining the workforce every year between 2011-2015.Indeed, at the fair for white-collared workers in Beijing, state organisers tried to show a thriving labour market.

An organiser who declined to be named said 108 large firms were hiring at the fair, though a handout listed only 56, mostly mid-sized technology, financial and construction companies. Exporters, hardest hit by the slowdown, were missing.

Over in Shanghai, firms in the growing services industry dominated the job fair. Some manufacturers were present, but not in the same force as in previous years.

“The economy has been slowing (and) our revenues began to drop last October,” said Stanley Yuan, a recruiter from Shanghai EasyMRO Industrial Technology Co. Ltd, which acts as a middleman between manufacturers and buyers of industrial equipment.

“We had 20 positions available last year for logistics and production, but we are only recruiting six this year,” he said.

But for Li Xiangwei, who left his last job in May as a highway builder earning 5,500 yuan a month, China’s cooling economy is the least of his concerns. “I can’t feel the slowdown,” he said, perusing the Beijing job fair.

Although he was happy with the pay at his previous job, he was tired of the constant travelling. “I could not even go home once a year,” he said. “I want something more stable.”