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China’s Economy Puts New Pressure on Its Lopsided Job Market

Wang Junping, front right, at a job agency in Beijing. He came there from Inner Mongolia looking for better work and was offered a cleaning job.Credit...Gilles Sabrie for The New York Times

HONG KONG — Wang Junping worked as a farmer in his native Hebei Province and as a coal miner in Inner Mongolia. But on a recent afternoon, Mr. Wang, 49, smartly dressed in a suit jacket, was awaiting lessons at an employment agency on the proper way to use a broom and mop to clean Beijing’s sprawling subway system.

A high school graduate, Mr. Wang quit his job at a mine last year after his pay was cut in half. Still, he decided against the cleaning job because the salary was too low, at around $320 a month.

“Beijing is the capital city and the window for cultural and political exchange,” Mr. Wang said. “I believed it would be easy to find jobs. But actually it’s not that easy.”

China has a job market mismatch.

Agriculture jobs have been declining for years, the result of urbanization and the country’s continuing economic transformation. And China’s huge manufacturing sector is showing new signs of stress, as some companies struggle with rising debt and rampant overcapacity.

China’s services business, which includes industries like logistics, retail, information technology and sanitation, is booming, driving job creation across the entire economy. Around 300 million people now work in services in China, accounting for nearly 40 percent of the world’s largest work force.

But workers are not easily making the switch. Unskilled or semiskilled workers like Mr. Wang can be a bit choosier now as growth of the pool of migrant workers slows. At the same time, soaring university enrollment means new graduates often struggle to find the high-paying white-collar jobs they were expecting.

The job market — and its lopsided pockets of supply and demand — presents a critical test for policy makers. For more than a decade, China’s urban work force swelled and incomes rose in the double digits, matching or exceeding the heady economic growth rates in those years.

Now, the nation’s economic outlook is slowing. Gross domestic product rose 7 percent in the first quarter, which represents the slowest quarterly growth since early 2009.

“We’re in this weird position where the Communist Party leadership seems completely comfortable with the idea that every year G.D.P. growth, wage growth — everything in the economy — is going to be growing a little bit more slowly,” said Andy Rothman, an investment strategist at Matthews Asia in San Francisco.

The leadership in Beijing has repeatedly signaled that slower growth is acceptable as long as the job market holds up. While China has moved in recent months to support the economy, cutting interest rates twice and freeing banks to lend more twice, some analysts say a still-sound job market is the reason it has not adopted a more aggressive approach.

“The Chinese are literally doing the least amount necessary in order to just maintain an air of stability,” said Leland Miller, president of China Beige Book International, which conducts surveys of thousands of businesses across the country. “It’s the opposite of what’s happening in Japan — shock and awe — or in Europe.”

China’s premier, Li Keqiang, recently sought to play down the importance of the G.D.P. growth target, saying instead that he preferred to focus on whether the economy was expanding in a way that created new jobs. And so far, it appears to be doing that. China added 13.2 million new urban jobs last year, surpassing Mr. Li’s official target of 10 million such jobs.

But Mr. Li’s jobs target is a gross figure. It does not factor in jobs that were eliminated. And more important, income growth is decelerating, down from double digits to around 8 percent last year. Any resulting pullback in consumer spending would have a direct impact on the service sector’s ability to continue to create jobs.

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Sales employees gather outside their Beijing real estate agency to learn a pitch from their boss.Credit...Gilles Sabrie for The New York Times

“If people including migrant workers were used to salary increases of 15 to 20 percent every year, and all of a sudden they are down to 10 or even 8 percent, how will they respond?” said Jurgen F. Conrad, head of the China economics unit at the Asian Development Bank in Beijing.

“Risks is not the right term, but there are some imponderables,” Mr. Conrad added. “If you look at the magnitude of the structural changes going on, it’s not always easy to predict the outcomes, including for employment.”

Data on China’s job market lack the frequency and general quality of figures in more developed markets. For example, the official urban unemployment rate, published quarterly, has ranged from 4 to 4.3 percent for the last decade, a level of stability that economists say is hard to achieve

Instead, shifts in the health of the job market tend to show up more clearly in wage and recruiting trends. Here, two overarching factors have emerged in recent years: The pool of migrant workers is tightening as the returns from urbanization diminish, while a shortage of white-collar jobs for new college graduates points to a skills mismatch.

“It is difficult to hire workers, even if the economy is not doing that well,” said Juble Lu, a manager at the Zhihua Kitchen Cabinet Accessories Factory in the southern city of Guangzhou.

Factories like Ms. Lu’s rely largely on China’s migrant work force of 175 million. But this pool of laborers is growing today at about only 1 percent a year, much slower than the broader economy. That tighter market tends to give bargaining power to workers and push up wages. For skilled workers, Ms. Lu said, wages could rise by as much as 20 percent a year. “Workers still have their many demands,” she said.

The tighter migrant labor pool is symptomatic of the broader growth slowdown. For more than a decade, China has been able to increase the size of its economy by several percentage points a year simply by people moving from farms to factories, where their productivity in economic terms soared. Today, that trend is slowing as the economic returns from urbanization become relatively smaller.

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Chinese agriculture jobs have been declining for years, a result of urbanization and the country’s continuing economic transformation.Credit...Gilles Sabrie for The New York Times

“A lot of the migration that is going to happen has already happened, and the people left in rural population who are not part of the migrant labor pool are either too young or too old, or have other barriers keeping them from migrating,” said Andrew Batson, the China research director at Gavekal Dragonomics, based in Beijing.

Income trends are further suppressing potential migration to the cities. In recent years, rural incomes have been rising faster than urban ones. “You can’t make the same on the farm as in the city, but at the margin things are getting better,” Mr. Batson said. “What you have to pay them to leave the homestead is rising.”

Contrast this with the situation at the other end of the job market. Having prevailed in the country’s ultracompetitive entrance examinations, new university graduates, usually from one-child families, have high expectations as they seek their first jobs.

But the realities of the market quickly set in. At nearly seven million a year, China today produces twice as many university graduates as it did 10 years ago. The supply appears to be outpacing the demand from prospective employers. According to official data, about 88 jobs requiring graduate-level education are available for every 100 such job seekers. For those with only vocational high school qualifications, the ratio climbs to 104 jobs for every 100 candidates.

“The reality is that a taxi driver in Beijing, unskilled, can make more money than a new university graduate,” at least initially, said Mr. Conrad of the Asian Development Bank. “This is of course shocking for these young people.”

China’s new graduates have traditionally shied away from working in factories, seeing this as a sign of lower status. But, perhaps because of the slowdown, there are signs this is changing. Dai Chaoyang, general manager of Shanghai Kadun Power Tools, says his company, which manufactures power drills, has started hiring new graduates in management trainee positions.

“They do not mind working in a factory environment,” Mr. Dai said, “as long as they are not working on the assembly line.”

Cao Li contributed research from Beijing, and Hilda Wang contributed reporting from Hong Kong.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Lopsided Job Market Puts Strain on China. Order Reprints | Today’s Paper | Subscribe

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