Younger Workers Suffer Most as Chinese Economy Struggles

Data released by China’s National Bureau of Statistics showed the unemployment rate for those between the ages of 16 to 24 jumped from 13.2% in June to 17.1% in July.

By comparison, the percentage jobless for those just slightly older, from 25 to 29 years of age, was a substantially lower 6.5%. That rate was up by just 0.1 percentage points from June to July.

The unemployment rate for those from 30 to 59 was 3.9%, down slightly from June’s 4.0%.

These statistics were calculated under what China considers a more accurate approach than in the past. Previously jobless rates for those in this age group included those still in school but also seeking work. China changed the calculation method for younger unemployed on the consideration that while students may be looking for work, they will be less aggressive in seeking jobs of any kind, part-time or not, than those out of school.

The change also had the benefit of lowering the publicly available figures for unemployment for this youngest employment category, making numbers appear a bit better than they had been in the past. Under the previous criteria, for example, June’s unemployment rate for those between 16 and 24 would have hit 21.3%.

But now, with the newly constructed jobless rate having jumped by 9.8% just in one month, from June to July, the data is exposing a serious soft underbelly for an economy which was already having difficulties long before these numbers came out.

What is driving this surge in younger workers still out of work begins with China’s economy already falling substantially below the roughly 5.2% growth rate achieved last year. Based on May 2024 projections from the International Monetary Fund, and backed by similar analyses by Goldman Sachs and Morgan Stanley, the best guess at this time for how much China’s Gross Domestic Product will improved is the much lower rate of 4.6%.

This slower growth rate is happening despite China putting a strong emphasis on investment in key economic areas such as artificial intelligence and robotics.

The growth rate could also suffer further if current high tariffs stay in place against China’s lucrative electric vehicle exports to the European Union and the United States. The EU tariffs which only just began are still subject to negotiation between Chinese and European authorities but although they might be lowered as exact Chinese subsidies are exposed, they are still expected to remain in place. The U.S. ones which will quadruple levies on Chinese EVs will begin soon, but unlike the EU ones are not likely to drop unless a World Trade Organization complaint filed by the People’s Republic of China against what its sees as a punitive levy is successful. The same U.S. tariff package also affects EV batteries and solar cells imported from China. With this being an election year, the Biden-Harris administration would also have a hard time backing down from the Chinese EV import duties without backlash from the Republicans.

Donald Trump, the Republican candidate for President and the one who when in the White House launched the current U.S.-China trade war, is promising even tougher sanctions against China, should he be reelected. His rationale for applying them this time is fuzzier than the last but the his threat will as a minimum make it even harder for Joe Biden to back down from the current list of punitive duties he has imposed on the PRC since taking office in 2021.

Besides the economic issues, another factor driving the current youth unemployment rate is the estimated 11.79 million students which just graduated and are just now looking for employment. With the economy itself sliding already compared to last year, a surprising trend this time is that even the rural parts of China which ordinarily go out of their way to seek out graduates from the best universities have stopped recruiting at previous levels.

Add to this that on August 15, the day before NBS announced its latest youth unemployment figures, the same agency revealed that unemployment had gone up in July to 5.2%. That is the first unemployment increase the nation had seen since February.

The impact on those 16 to 24 years of age includes that they are now ratcheting their salary requests downwards. Income expectations for these newest entries to the job market are now a third below what they were a year ago.

Soon after the August 16 NBS youth unemployment data was released, the State Council of the People’s Republic of China held a review of the situation. With the impact of lower salaries and higher unemployment in this demographic considered a serious issue, Premier Li Qiang told the Council it should work harder to “stabilize employment for key groups”.

That echoes a similar message delivered in July by the Communist Party Central Committee. During its deliberations at that time, it said Chinea needed to take quick action to “improve the system of employment support for key groups such as college graduates, rural migrant workers and ex-service members”.

Then just two weeks ago the Communist Party’s Politburo directed that companies should be going out of their way to hire new graduates over more senior ones. Though not explained at the time, that declaration was probably because the Politburo, the group which is responsible for most of the country’s most significant policy decisions, already had early insights as to which way youth unemployment was heading in China.

While the directives from the various ruling bodies may have some impact, companies may find themselves with limited ability to do much to implement those instructions without putting their businesses at risk financially. If trends this time follow ones from a year ago, when in June 2023 the “old” youth unemployment rate hit its highest level ever recorded under the tenure of President Xi Jinping, it is likely the Chinese Central Bank will help out by injecting new capital into targeted sectors of the economy where increased hiring of new graduates could happen.

That will take time to play out, however, leaving China with a potentially even more serious youth unemployment challenge for much of the rest of 2024.