BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/04
Urban private-sector service businesses is the key to the sustained high employment rate. The service sector is the only part of the economy where labour force has steadily increased. In contrast, the number of workers involved in primary production (mostly farming) plunged in 2013–2014, while the manufacturing workforce showed a slight decline. Primary production and manufacturing each now employ slightly less than 30 % of the Chinese labour force, while services account for over 40 %. Last year’s purchasing managers’ index (PMI) readings repeatedly showed service firms continued to take on new staff, while manufacturing shed jobs. The rapid growth of the service sector is critical also in the years ahead. By some estimates, about 10 million people work in overcapacity industries, where about 3 million jobs are to be cut.
China has begun to sporadically release findings of its 31-city survey on unemployment. The survey shows that unemployment rate is about 5 %, and it has budged very little over the past two years. While this may indicate continuing problems with unemployment statistics, it also tells about the extreme flexibility of Chinese labour markets. If an internal migrant to the city fails to find work, he or she just returns to the home village to farm the family plot. Such cases are not captured in the unemployment figures. Only one in ten migrant workers are covered by unemployment insurance.