China’s Job Market Blues

Weak employment indicators complicate the task of investors looking to play the rebound in Chinese growth

By Nathaniel Taplin





American politicians have complained for years about China and other low-cost producers stealing U.S. jobs. Now the shoe is on the other foot, complicating the task of investors looking to play a Chinese growth rebound.

The U.S. job market is at its best, by some measures, since the 1970s. Meanwhile, Chinese workers are being hit by a slowdown in labor-intensive exports and the lagging impact of last year’s shadow-banking crackdown, which particularly punished the private-sector companies that drive job growth. Small companies probably bore the brunt, but big layoffs at highfliers in the tech sector like JD.comand Tencent are adding to the sour mood.

China’s official unemployment rate, even after recent revisions, is still widely considered unreliable. The employment components of China’s purchasing managers’ indexes are a better gauge. They tend to move in sync with other key metrics like industrial profits and the so-called Li Keqiang index—an average of electricity, freight and lending growth named for the current premier, who reputedly considered it more reliable than official GDP figures. At the moment, both China’s manufacturing and nonmanufacturing employment PMIs remain firmly in the doldrums, about two index points below mid-2018 levels.

Leading indicators for China’s economy are starting to pick up but will take a while to work their way down into more jobs and spending power. Photo: Tomohiro Ohsumi/Bloomberg News 


Leading indicators for China’s economy such as credit growth are starting to pick up after a brutal 2018. But that will take a while to work its way down into more jobs and spending power, especially since rebounding inflation is also eating into incomes.

It is tempting to take advantage of a recovering Chinese economy by buying consumer stocks—particularly given last year’s big tax cut. But investors might be wiser to wait for more compelling evidence that the job market has bottomed before diving in.

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