Use of a more accurate jobless figure shows Beijing's confidence in generating employment

For decades, China has been using the registered unemployment rate to monitor its labor market. But a recent development has shown that the country is working toward using a new indicator, the surveyed jobless rate, to replace it.

On July 30, the State Council said in a statement that the conditions are ripe to publish and use the surveyed jobless rate. It asked the statistics agency to expand the survey, improve the methodology and publish the rate at a proper time.

This will be a major improvement that is in line with international practice and reflects authorities' confidence in maintaining the stability of the labor market.

The move is not all of a sudden. In the past year, government officials have quoted the surveyed rate from time to time.

The most recent time was in June. At a seminar with economists on June 11, Premier Li Keqiang issued the unemployment rate based on the random surveys, showing that unemployment fell over the past four months from 5.17 percent in March to 5.05 percent in June.

In April, the National Development and Reform Commission also announced at a news conference that China's surveyed unemployment rate in 31 large and medium-sized cities was 5.17 percent at the end of March, a slight decline from a month earlier.

The first time the indicator was formally announced was a year ago. In August last year, the commission said in a statement on China's overall economic performance on its website that the country's surveyed unemployment rate was 5 percent in the first half of 2013. A month later, Premier Li cited that figure in an article in the Financial Times ahead of his visit to Europe. At that time, many people learned that the Chinese government had been compiling surveyed job data for some time.

Before that, the registered unemployment rate was the only official jobless data. But that indicator does not accurately reflect the situation because it does not include jobless people who do not register with the authorities. It also does not include the rural population, migrant workers or new graduates.

The inaccuracy can be seen in the limited fluctuation in the registered unemployment rate, which always hovered around 4 percent. In 2009, a year when massive layoffs were common, the rate stood at only 4.3 percent.

To solve that problem, authorities have been working since the late 1990s on the surveyed rate, which polls residents instead of passively waiting for unemployed people to register. The figure was based on surveys of the labor-age population first conducted in a small number of selected cities and among selected labor groups. Previously, the result was sent to certain government departments for their reference in designing policies, but was not announced to the public. According to insiders, the rate stood at 6.02 percent in 2003, came down to about 5 percent from 2005 to 2007, but climbed back to 6 percent in 2008 and 2009 before stabilizing at 5 percent in the following years.

Policymakers are making less frequent use of the registered urban employment rate. With the statistics agency gradually improving the calculation of the surveyed rate, which is commonly used internationally to gauge the job market, policymakers will lean toward this indicator as the broad indictor of the job market. The indicator is updated monthly and covers at least 31 cities. This represents remarkable progress in China's measurement of the labor market. The methodological change shows that policymakers, instead of hiding the real picture, are willing to face reality and make it public.

Although the surveyed rate is only for the government's internal use for now and the registered rate will continue to be published as official job data, it is expected the surveyed rate will replace the registered rate as the major job indicator to be used and recognized by the market and researchers, too.

Expectations are that the figure will soon be published regularly, which has further implications.

First, unemployment figures are a decisive indicator policymakers use in designing their policies. They are keen to maintain a certain level of economic growth mainly because of employment concerns. They are afraid insufficient employment will pose a threat to social stability. On Li's visit to Chongqing in April, he told port workers, "What concerns me most is employment." To come up with a set of surveyed job data also shows the importance top policymakers attach to the job market. They need to have a real picture of the market before they make economic decisions.

Second, if the latest surveyed rate is to be believed, the Chinese job market is improving in the second quarter. The surveyed jobless rate climbed to 5.17 percent by the end of March from 5 percent in the first half of last year. But it gradually ebbed to 5.05 percent in June, showing a slight improvement. This is a strong indication of what the overall economy is doing.

The trend is expected to continue in coming months. The purchasing manager's index rose to a more than two-year high in July, reflecting a solid recovery in the manufacturing sector that will bode well for the labor market.

Third, allowing the surveyed rate to be published means that authorities are more confident of their ability to stabilize the job market. One of the reasons this indicator was not made public may be that it was always higher than the registered rate. The government does not want to create a sense of worry or panic. The gap between the two indicators compiled by the government stood at 2 percentage points during the global financial crisis in 2008-09, according to researchers with access to both indicators. The gap widened to nearly 6 percentage points based on surveys by some researchers.

Because the government plans to regularly publish an official version of the surveyed rate, it must have confidence in its ability to narrow the gap within a certain small range so people will not panic over the gap.

China's ability to create jobs is growing thanks to progress in economic restructuring. Reduced reliance on manufacturing and export sectors, and a larger contribution from the services sector, mean that the influence of global economic fluctuations on China's job market is dropping. Now stable domestic demand can support employment in China.

But the surveyed rate still fails to reflect the full picture of China's job market, as some old problems persist. The rural population is not included, migrant workers are not covered, and most likely new graduates are not part of the survey, either.

In this sense, the surveyed rate reflects only part of the picture. Also, the figure, which is supposed to monitor urban employment, cannot fully show the situation in cities. The survey base is limited to 31 large and medium-sized cities. Smaller cities, where the unemployment rate could be higher due to fewer job opportunities and a larger unskilled urban population, should also be included.

The authors are analysts at Shanghai-based Universal Consultancy. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 08/08/2014 page10)