China has a new youth jobless rate. Some economists are ignoring it.

China stopped publishing its youth unemployment rate in August, as the challenges facing China’s young people had become a focus of international attention. (Photo: Zuma Press)
China stopped publishing its youth unemployment rate in August, as the challenges facing China’s young people had become a focus of international attention. (Photo: Zuma Press)

Summary

The country released a lower number based on a new methodology that has some scratching their heads.

HONG KONG—After going dark for months, China has finally released a revised youth unemployment rate. Spoiler alert: It’s lower.

Chinese officials said they adjusted the way they calculate the rate to arrive at a more accurate figure, but economists are skeptical it will do much to dispel the gloom hanging over the economy. And some say they are still scratching their heads over how China came up with the new figure.

On Wednesday, China released a youth unemployment rate of 14.9% for December, a substantial drop from the rate of more than 20% in June that spawned headlines about record high youth unemployment as the economy struggled to regain its footing last year. Chinese officials suggested they arrived at the number by changing the way they incorporate students in their calculations.

Economists said a revised youth jobless rate for a single month likely wouldn’t sufficiently reassure the public about improved job market conditions or erase longstanding doubts about the accuracy of the country’s official statistics.

“Adjusting how they calculate the figures at this moment may even exacerbate the public’s distrust in official data," said Dan Wang, chief economist at Hang Seng Bank China.

The release of the new figure comes as Chinese leaders have sought to rally the nation in recent weeks to view the economy more positively. Earlier this month, a senior party official urged the country’s propaganda chiefs to “promote the bright prospects of China’s economy," echoing a message from a Party conference that Chinese leader Xi Jinping presided over last month.

China’s National Bureau of Statistics said the calculation of the youth unemployment rate now excludes nearly 62 million students aged 16 to 24 studying full-time on campuses in an effort to focus on those with “actual demand for jobs," such as those who have finished education or those who are only studying part-time.

The NBS didn’t provide complete details of its new methodology or how it compares with the old one. One key puzzle is that the NBS previously indicated it didn’t count most students anyway: Before it stopped publishing the old data, the agency said in June there were around 96 million people in the 16 to 24 age group in total, but only 33 million either in work or looking for a job, leaving some 63 million outside the labor force definition.

Another problem for economists is the NBS hasn’t recalculated past youth unemployment rates, as is common when statistical authorities rewrite their rules. It has only published a single month of data.

Economists say the upshot is that it is hard to figure out if youth unemployment in China is getting better or worse, and why, until there is greater clarity on who is being counted as unemployed, and until there is a longer series for them to scrutinize.

“There’s quite a bit of murk," said Duncan Wrigley, chief China economist at Pantheon Macroeconomics in London. “They haven’t given enough info to really assess it."

Excluding full-time students from unemployment rolls altogether is unusual. Other countries, including the U.S. and nations in Europe, treat full-time students much the same as anyone else. In the U.S., if a student has been looking for a job within the past month, and is able to start work within two weeks, then they count as unemployed—even if they are enrolled in high school or college. If they aren’t looking for work, they are categorized as outside the labor force.

Statistical standards on how to measure joblessness and other labor market indicators are set by the International Labor Organization, a United Nations agency based in Geneva, Switzerland. A spokeswoman for the agency said that excluding students from the measure of unemployment isn’t in line with ILO standards, though she added the ILO doesn’t have enough information to make a complete evaluation of how the changes affect China’s labor market data.

China’s statistics bureau didn’t respond to a request for comment.

Bruce Pang, chief China economist at Jones Lang LaSalle, said officials in China have solid reasons to exclude students from the calculation, given that only a fraction of Chinese students seek part-time work compared with many Western countries such as the U.S.

But adopting a new methodology prevents the public from making direct comparisons with historical figures, he said, adding that the jobless rate among young people is typically lower in the winter and higher in summer during the graduation season.

“It’s hard to argue that the new data necessarily points to an improvement or not," he said.

China has battled persistent skepticism about the reliability of its economic data. On Wednesday, the country reported 5.2% economic growth for 2023 over the previous year, hitting the government’s goal. But many research firms have questioned the number. Rhodium Group, a research firm based in New York, estimates that China’s actual growth rate last year was closer to 1.5%.

Economists have long held misgivings about the quality of data on China’s labor market, in particular how it measures joblessness. For example, the country’s official unemployment survey leaves out hundreds of millions of rural people who seek jobs in cities, because the authorities say that they can return to farming if they are out of work.

China stopped publishing its youth unemployment rate in August, as the challenges facing China’s young people had become a focus of international attention—and potentially embarrassing for the ruling Communist Party.

The decision deprived businesses, investors and economists of an important data point on the world’s second-largest economy. Xi has given priority to national security, leading to greater opacity around China’s economy and corporate landscape as authorities tighten their grip on information.

China has restricted access to a range of information on the economy—everything from corporate financials to data on ship movements and coal usage. A 2021 data-security law expanded the scope of what constituted sensitive information, leaving foreign firms struggling to persuade their Chinese counterparts to share information.

Setting aside the fog surrounding China’s new figure, some economists see few signs elsewhere that point to a stronger labor market. The country is wrestling with persistent deflationary pressure, which weakens overall demand and tends to lead to higher unemployment. New investment by private firms, which supply about 80% of jobs in cities, shrank last year.

“Without a major improvement in companies’ profitability, China’s job market condition may stay soft in the near term," said Larry Hu, chief China economist at Macquarie.

Write to Stella Yifan Xie at stella.xie@wsj.com and Jason Douglas at jason.douglas@wsj.com

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