No One Trusts China's Unemployment Rate

Oct 5, 2012
Originally published on October 5, 2012 3:09 pm

Ask an economist like Eswar Prasad, who used to work at the International Monetary Fund, "So, do you know, what the unemployment rate in China is?"

And he'll answer, "We don't."

The official unemployment rate, put out by the government, Prasad says, is 6.5 percent, but according to him, "that number has no credibility at all."

He's not the only dubious one.

"The unemployment rate in China is one of the most useless and ridiculous statistics out there," says macroeconomic researcher Arthur Kroeber of Dragonomics. "No one pays any attention to it, because everyone knows it's a complete fiction."

It's not like China isn't trying. It has a national statistics office that works very hard. But the country is so big, and changing so quickly, that it is actually really hard to keep track of what is going on.

Kroeber suggests proxies. He thinks China should count the number of shipping crates, how many tons of coal being shipped, the amount of electricity production, and floor space being built at any given time. "Those numbers," he says, "are harder to fudge."

Everyone in the world wants to do business in China. And China itself wants to know more about how its own economy is changing. But it takes decades to develop sophisticated statistical models that can give trustworthy figures.

Statistics that apply to an export-only oriented economy aren't good enough to capture the complexity of a place like China. So, the country is still working at figuring out how to count itself.

In the meantime, Western firms have jumped in and started in their calculations, using methods perfected in the United States. But anytime you try to sum up an incredibly complex economy with one number — you're going to have some controversy.

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The Bureau of Labor Statistics said, today, the September unemployment rate dropped to 7.8 percent. That's the lowest since the start of 2009. The economy added 114,000 jobs. And the government also revised its figures for July and August, reporting more jobs created than previously thought. Federal experts do this regularly, going back through their work to check it again, which is one reason the Bureau of Labor Statistics is considered a trusted source.

It's a different story in China, where tracking the second biggest economy in the world is a guessing game.

Here's Zoe Chace of NPR's Planet Money team.

ZOE CHACE, BYLINE: Let's start with a very basic question. So, do you know, what's the unemployment rate in China?


CHACE: Hmm. Eswar Prasad is the former China guy for the International Monetary Fund. He teaches economics at Cornell. If anyone should know that number, it's him. Wait, he's got it now.

PRASAD: The official unemployment rate is about six and a half percent. But that number has given no credibility at all.

CHACE: He's not the only one. Arthur Kroeber is an economic researcher in China with Dragonomics.

ARTHUR KROEBER: The unemployment rate in China is one of the most useless and ridiculous statistics out there, and no one pays any attention to it because everyone knows it's a complete fiction.

CHACE: It's not like China isn't trying. They have a statistics office, but the country is so big and it's changing so quickly that it is really hard to keep track of what is going on. The problem is everyone in the world wants to do business in China. They need to know which regions are doing well, which places are slowing down.

Kroeber says, when you're doing business with China, you have to use tricks. You have to find little things that tell you indirectly how things are going.

KROEBER: How many tons of coal being shipped, amount of electricity production, the number of floor space being built at any given time; those numbers are harder to fudge.

CHACE: But this got so frustrating, one guy in the united states decided to do something about it.

Craig Charney takes his own survey of China's economy. He's a private, professional pollster. Rather than wait for China to fix it's screwed up statistics system, he decided to do something. He's a polling guy. They've got phones in China. Why not start to just call around and ask - construction companies, manufacturing, big retail store owners, bankers all over the country - how's it going? How is business?

CRAIG CHARNEY: You know, here's somebody who was just talking about how the textile business works. He says, look, the third quarter's the busy season in our industry, because big brands begin to prepare for autumn and winter production. But, the orders now are still looming. Things are below par. This is normally busy season for us, we're not that busy.

CHACE: It's just one anecdote. But he combines it with 1,999 little stories around China and he makes this little book.


CHACE: He publishes once a quarter for people to get insight into what's happening in china. It still won't tell you the unemployment rate. It will tell you that there are few new construction contracts at one firm in Shandong. This one guy, he's not doing much business.

It sounds basic. But it's a sign of how complicated China's economy has gotten. A generation ago, you could count the number of ships leaving Shanghai harbor. That would tell you all you need to know about China. Now, at the very least, you need thousands of stories from every region of the country to explain what's really going on.

Zoe Chace, NPR News.


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