Wednesday 4 November 2009, 14:00. Copyright of CNMI China Market Intelligence.
Ever since the global economic downturn really started to make its presence known halfway through 2008, unemployment figures have been a key statistic to check on national economies and how they were faring in these rough times. Of course, the numbers rose across the board but the real question was by how much, and how long it would continue. Indeed, some way into 2009 the most brazen of economies (a category that I place China in, firmly) were talking not of a loss of jobs but the creation thereof. Surely a reliable indicator that things are picking up and all is well in the promised land - or is it?

At the end of 2008, China was reporting an urban registered unemployment rate of 4.2%. Read that sentence carefully, for there are two key definitions that precede the word unemployment: 'urban' and 'registered'. What is not included in this figure is a group of people that were hit very hard, the migrant laborers. They had come from all over China to the cities on the East coast to provide much-needed muscle in the numerous (de)construction projects that were fueling development. Other groups moved down south to industrious Guangdong province where millions of factories were in need of labor. Their jobs depended on sustained economic growth. When China announced the closure of 670,000 factories over the third quarter of 2008, the migrant laborers were the first to go. As such, they provided a buffer of approximately 10 million for the published unemployment rates. On top of that, anyone without a job outside the urban areas wasn't being counted either - which is interesting, considering there must have been a reason for labor migration from the countryside to the cities. Could it be that there was no work for them, outside the cities? So what China had here was a huge number of people who were not officially unemployed but certainly without a job. When China published it's unemployment rate of 4.2%, it was really saying that of all the people living permanently in urban areas, and of whom we know exactly what they are doing and where, there were around 9 million that did not have work.

But that was then and this is now. According to China Daily, over 7.5 million jobs were created in the first eight months of 2009, and that is what I really wanted to talk about in this article. You can't just create jobs to solve an unemployment problem. It takes a trip to China to really understand what the creation of jobs implies. There are four (!) crossing guards on every major intersection in Shanghai. Many supermarkets employ more staff than there are customers in the store at any given time. There are guards keeping an eye on your parked bike on every other streetcorner in China. Not long ago, I went to a park outside Shanghai. I had to purchase a ticket at the entrance gate, show it to another employee on the other side, and have it stamped by a man in uniform standing next to her.

Convenient as this abundance of personnel may sometimes be, these jobs really can not continue to exist forever. The only reason they currently can is because there are still people who are able to work for incredibly low wages and survive. But China is getting more expensive every day and cities like Shanghai can no longer be considered cheap places to live. Even on the bottom end of the scale, Chinese workers have seen their costs increase as the price of basic necessities such as food, rent, and transportation has gone up. Wages will eventually have to rise, especially once the Chinese yuan finally appreciates. When that happens, the people working in jobs that serve so little economic purpose will have to be let go. They will have become too expensive and once wages start to hurt in Chinese employers' wallets, there is very little room for those that do not make a significant contribution.

The results of such an enormous loss of jobs should not have to be explained. The alternative for China is to remain a so-called labor paradise, where manufacturing is the main driver of an export-oriented economy and work comes cheaply. We all know that is not the future China has in mind for itself, so let's hope it has a plan.