China’s Unemployment Target to Get More Realistic

Chinese authorities have for the first time begun to include a more-accurate jobless rate in their annual development targets amid a softened growth target and criticism of the long-standing unemployment metric.

The goal for the surveyed urban jobless rate was set at 5.5% or lower by Chinese Premier Li Keqiang in the government work report he delivered at the opening of the most important legislative meeting in decades in Beijing. The meeting set the gross domestic product (GDP) growth target at around 6.5% for 2018.

Li said the surveyed urban unemployment rate, which is on the government’s long list of targets for the first time this year, aims to show a more-rounded picture of employment. Meanwhile, the registered jobless rate, an indicator that has barely moved for seven years, was capped at 4.5% in the report — the same as in the previous report.

The surveyed urban unemployment rate has been designed to include the status of migrant workers — a significant portion of the country’s workforce that underpinned the Chinese economic miracle of the past 30 years. These people are often missing from the registered urban employment rate, which measures only the number of people who are capable of and willing to work and who voluntarily report that they are unable to find employment to a local social service department.

Experts have been calling for the inclusion of a surveyed rate into economic policy targets. Ma Jun, director of the Center for Finance and Development under the Tsinghua National Institute of Financial Research, said China should place the maintenance of “a reasonable surveyed urban unemployment rate as the core objective of macroeconomic policies.”

Ma said China could set a range for the surveyed urban jobless rate to allow for fluctuation. Because an unemployment range is more flexible than an economic growth target, it will help local authorities avoid using excessive stimulus such as credit expansion and higher leverage to meet targets.

China is the only G-20 country that still has a rigid GDP growth target, said Alfred Schipke, International Monetary Fund senior resident representative for China. Most countries base their policy targets around their jobless and inflation rates.

The National Bureau of Statistics has published two surveyed urban jobless rates, the first of which was calculated on a national scale and the second of which was estimated based on polls conducted in 31 major cities. While both were below 5% by the end of 2017, according to a statement from the bureau, it’s unclear whether the data will now begin to be released on a regular basis.

Some economists are more skeptical about China’s relaxation of GDP targets. “For all the recent talk of focusing less on the speed of growth, we suspect it will return to the forefront of policymakers’ concerns if a slowdown threatens to weaken the job market,” economists from research firm Capital Economics said in a note.

Contact reporter Pan Che (chepan@caixin.com)