Are fears of mass unemployment in China overblown?

{WENXI, China] Despite its sputtering economy - or perhaps because of it - China's labour market may be able to provide more jobs for laid off workers than many think.

The working age population is shrinking by several million each year and the number of workers willing to migrate beyond their home province is falling, leaving jobs available for those willing to travel.

This suggests concerns about mass unemployment as China cuts down its industrial capacity and the risk that this could lead to social unrest may be overdone.

Take Li Xi, 34, for instance.

After losing his job of 15 years at Highsee Iron and Steel in the slow-growing northern province of Shanxi, Mr Li was not out of work for long.

Encouraged by friends to join them at an electronics factory 1,000 km (620 miles) to the south, he made the journey to Suzhou near Shanghai. The rest was easy. "On the first day I did a health check, and on the second day I was working," Mr Li said.

China's economic growth slowed to a 25-year-low in 2015 of less than 7 per cent and Beijing has flagged layoffs as it reduces massive surplus industrial capacity and gears the economy more to services and consumption.

Sources said in March that China was expecting to lay off 5-6 million state workers in the next two to three years as it curbs production capacity and pollution in rust-belt provinces.

While there is scant official data to build an accurate picture of Chinese unemployment, Chang Chun Hua, China economist at Nomura, said the jobs market can handle the unemployment pressures for now.

The working age population has been shrinking since 2012. Last year, the number of people between the ages of 16 and 59 shrank by 4.87 million, government statistics show.

In 2014, the age group contracted by 3.71 million.

At the same time, the government says a higher-than-expected 5.77 million jobs were created between January and May this year.

"In general, the current unemployment pressure is still manageable for the Chinese government," Mr Hua said.

On a recent visit to Shanxi, several laid-off workers including Mr Li said they were able to find work quickly and relatively easily.

To be sure, their new jobs were often ones that paid a similar salary, or less. They went to other factories and construction sites, or worked in small family-run stores. One delivered ice cream. Some migrated far from home to find work.

Mr Hua said the northeast rust-belt provinces of Liaoning, Heilongjiang and Jilin are reeling from China's economic slowdown. Workers are fleeing to the economically stronger regions like Tianjin and Beijing nearby to find jobs.

Further down the coast in the Yangtze River Delta, powerhouse provinces such as Zhejiang and Jiangsu are providing labour jobs "at a decent pace", Mr Hua said.

A municipal government survey in 2014 in Suzhou, where Mr Li found a job, showed that 62 per cent of 500 manufacturers in different sectors faced a labour crunch. Half said they had a hard time recruiting.

In the south, the manufacturing hub of Guangdong - known as the factory of the world for its output of everything from garments to shoes and toys - is providing work for migrants from nearby Guangxi and Hunan and the inland provinces of Henan and Hubei, among others.

Some Guangdong factories are relying more on day workers to help them cope with unpredictable demand.

Still, migration is slowing down nationally, government data shows.

The number of migrant workers in China stayed basically flat in 2015 after years of growth. The once-bulging army of labourers who sought jobs outside of their home province dropped by 1.5 per cent - the first decline in six years.

"Given the wage pressures and declining working age population, the negotiating power of rural workers that are willing to migrate is getting better," said Trinh Nguyen, senior emerging Asia economist at investment and financial services firm Natixis in Hong Kong.

Many economists are sceptical of China's official unemployment rate, which has been about 4 per cent for years despite the dramatic slowdown in growth from double-digit rates in the previous decade.

They suspect real unemployment is higher. Purchasing managers' indexes show employment growing in service industries, but falling steadily in manufacturing.

Economic research group Fathom Consulting estimated in a June report that China's real unemployment and underemployment rate was 10.1 per cent in 2015 and could rise to 12.9 per cent in 2016. "The core issue is: What kind of job can they find and what kind of pay can they get for a new job?" said Cui Ernan, an economist with Gavekal Dragonomics, an economics research consultancy, in Beijing.

"If they lower their expectations for their pay or for the role that they are working in then it's not that hard for them to find a job."

Wang Liang went back to work in April at a steel mill in Shanxi that reopened after a revival in steel prices. He left a job at a nearby plant making coking coal, the fuel that fires the mills.

As he ate a lunch across the street from the factory, he did not seem particulary worried about the prospect of the mill closing down again if steel prices force it back into the red.

"When it's open, I'll work there. If it closes, I'll go back to a coke plant. There are four or five of them nearby," he said.

REUTERS