Case for recovery without job losses

There is talk among the Chinese public about the increasing unemployment. Since China's economic stimulus plans concentrate mainly on capital-intensive industries rather than labor-intensive ones, the prospect of an "economic recovery without employment" is looming large. This makes unemployment a problem that may not be relieved through economic growth.

Now it is rather difficult to obtain statistics showing the entire picture of unemployment. Based on the employment elasticity and the input-output method, the Renmin University of China estimates that the number of unemployed in the non-agricultural sectors will surge to 36.5 million this year. The new unemployed will mainly consist of migrant workers from rural areas, fresh college graduates, and demobilized soldiers.

Unemployment will directly lead to slippage of consumption, and persistent unemployment will increasingly drag the economy down. The rise in the rate of unemployment will dent people's income and dampen their confidence to spend, making consumption decline. We forecast that the vicious circle of unemployment and consumption slippage will gain momentum in the coming months and threaten the economy with another bout of slump.