HONG KONG (Reuters Breakingviews) - China’s new unemployment measure has a big job ahead. In the first regular monthly numbers using surveys, Beijing reported a 5.1 percent jobless rate. It’s a far better method than relying on claims of work-seekers. The question is whether officials will trust the gauge enough to scrap GDP growth targets – and if investors and others will trust it in a downturn.
The country’s unemployment rate has hovered stubbornly around 4 percent for well over a decade, through booms and busts. It was calculated using figures derived from those who register as jobless with the labour ministry. They almost certainly painted an inaccurate picture by ignoring the country’s around 280 million migrant workers, who cannot make such claims outside their hometowns. It also skipped locals who don’t bother applying for the meagre support.
At last, China is catching up to the rest of the world in this particular area of counting. The updated process is based on International Labour Organization standards and shows at least a bit more variation than the traditional metric. Analysts at Citi reckon it more or less matches another gauge, the employment sub-index of the manufacturing Purchasing Managers’ Index, based on ad hoc reports of the measurement so far.
What’s uncertain is just how much authorities will be willing to depend on the fresh approach. Premier Li Keqiang said the government would aim to keep urban joblessness below 5.5 percent, among other work-related goals. A bigger step would be to ditch economic expansion targets in favour of measures of full employment, as is done in the United States and other countries. That in turn might curb the temptation to reach for the stimulus button every time growth softens.
More broadly, skepticism has long dogged official Chinese data, including for GDP, which routinely records only about one-tenth of a percentage point changes each quarter. That triggered hunts for proxy measures during a slump in late 2015 and early 2016. At the time, the unemployment figure was considered so risible to investors and analysts that it was not even worth discussing. If it becomes a serious part of the conversation the next time the economy sours, it would be a good sign for China.
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