China’s unemployment insurance payouts reached a record $5.2 billion in June – its highest in nine years – as the country grappled with the economic impacts of tough Covid restrictions and a debt-laden property sector.
The $5.2 billion in payouts was the most since data began in 2013 and a 256.6% increase from a year earlier, according to data from the Ministry of Human Resources and Social Security.
“China could continue to see job market pressure, given slower GDP growth creating fewer jobs, sluggish external and domestic demand,” Bruce Pang, chief economist at Jones Lang Lasalle, said.
“Small and medium-sized enterprises are struggling, and the number of university graduates is high,” he added.
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Mounting Deficit
The sharp rise in payouts caused the fund to suffer a 22.7-billion-yuan deficit in June, which was well up from a 4.9 billion yuan deficit in May and in contrast to monthly surpluses from January to April.
China’s unemployment insurance fund is pooled from employers, employees and government subsidies, and the spending offers the jobless help with their basic needs.
The world’s second biggest economy has been hit by strict Covid-19 curbs this year, which have disrupted supply chains and hurt job-creating small businesses.
Young Hit Hardest
The youth unemployment rate rose to a record high of 19.9% in July, even as the nationwide survey-based urban jobless rate eased to 5.4% in July. The official figures to not include a vast number of unemployed people from rural areas.
The government said in May it would offer a subsidy of 1,500 yuan to firms for each university graduate hired.
China aims to keep the urban jobless rate below 5.5% and to create more than 11 million new urban jobs this year. In the first seven months of 2022, some 7.83 million new urban jobs were reported to have been created, reaching 71% of this year’s target.
GDP Target Downplayed
Chinese policymakers have played down the need to hit the annual economic growth target of “around 5.5%” in 2022, as headwinds persist.
Goldman Sachs lowered China’s 2022 full-year GDP growth forecast to 3.0% from 3.3% previously, while Citi also marked down its full-year growth forecast to 3.5% from 3.9% last week.
“Propping up domestic demand to support jobs remains a policy priority, which is key yet challenging,” Pang said.
- Reuters, with additional editing from Alfie Habershon
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