Alas, Chinese employment is booming!

From Citi comes the bad news that the Chinese labour market is booming::

 

The labor market has shown signs of tightness even as growth slows down – With 10.8 million urban jobs created in the first nine months this year, the annual target was met ahead of schedule. Service industry and private sector have contributed most to job creation. The demand-supply ratio in the labor market stood at 1.09 in 3Q, implying overall labor shortage which supports wage growth. Enterprises’ resort to automation also reflects anticipation of chronic labor shortages. Changing dynamics in the labor market have started to reduce government focus on high-speed growth, and we think the 2015 growth target is likely to be lowered to around 7%.

 Demographic and industrial changes are long-term drivers – Recent data suggest full employment in China no longer requires 8% growth. Two structural changes are shaking the conventional wisdom: (i) the working age population has peaked and rural workers are increasingly reluctant to leave their hometown, constraining labor supply; (ii) the service industry has been growing faster than the overall economy, and the industry appears more labor intensive than manufacturing.

 Growth target will likely be lowered next year – We believe the 7.5% growth target for 2014 has tied the hands of the government. It is increasingly recognized that beating a low target is better than missing a high target, and de-emphasizing growth target would leave more room for structural reform. Our rough estimate shows that even with 6-6.5% GDP growth in 2015, more than 11 million new urban jobs could be created and survey-based unemployment rate would not exceed 5.5%. However, since the government is committed to doubling 2010 GDP by 2020 which requires average annual growth of at least 6.8% during 2015-20, we think 7% is the most likely pick of growth target for 2015.

Yes, but that won’t be enough to rebalance so it will keep falling. And as services rise, driving jobs growth, building will fall. Bad news for Australia short, medium and long term.