Unemployment Spikes for Key Chinese Age Group as AI Use Spreads

vd4gx4464rv)34yw8c1)3ha2_media_dl_1.png National Bureau of Statistics

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(Bloomberg) — An unexpected deterioration in China’s labor market has reached the key demographic of early-career workers, as seasonal pressures amplified spillovers from the war in Iran while wider use of artificial intelligence raises risks for employment. 

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The latest batch of official statistics this week revealed the jobless rate climbed to 7.7% in March for 25- to 29-year-olds. That’s up from 7.2% a year ago and the highest since the National Bureau of Statistics revamped its employment data more than two years ago and started to treat that age group as a separate category.

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The data adds to signs of growing distress in China’s labor force of over 700 million — the world’s biggest — after overall unemployment saw a surprise uptick last month and wage incomes expanded at their slowest rate since late 2022. Though pressure on jobs typically increases around the Lunar New Year, and the holiday’s later-than-usual timing this year may have worsened the pain in March, other factors are increasingly coming into play.

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The conflict in the Middle East, now in its eighth week, has caused a massive disruption for energy exports from the Persian Gulf, scrambling trade flows and squeezing profitability. Younger job seekers are also having to contend with what Citigroup Inc. has called China’s “widespread but still shallow” adoption of AI, a transformation that eventually threatens to displace an estimated 70 million workers in the country.

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“The uncertainties on costs brought by the Iran war might have disturbed hiring plans and led to a worsening of labor market indicators in March, after they showed some improvements in earlier months,” said Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics.

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Unemployment increased in nearly every pocket of the labor market in March, reaching nearly 17% for those aged 16 to 24. The overall jobless rate climbed to 5.4%, the highest in a year, and went up for 31 big cities. 

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But the 25-to-29 cohort stands out for being more vulnerable to the potential shock from AI on the labor market. It’s a group that was traditionally appealing for employers, encompassing new job entrants transitioning from school to work.

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Poorer outcomes for people at the onset of their careers could represent the culmination of pressures on younger workers that have been building in China since the pandemic in 2020 and are now made worse by AI-powered systems — especially when it comes to the prospects for entry-level positions. 

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Joblessness early in life risks leaving long-lasting scarring effects and might threaten future employment, studies have shown. 

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Without a turnaround, China could find it hard to escape jobless growth as it relies more heavily on manufacturing, an industry that’s become far more automated over the past decade. Even in the southern economic powerhouse of Guangdong, many factory workers are struggling as labor-intensive sectors lag high-tech businesses in export growth.