Goldman Sachs says jobs mismatch drove up China’s youth unemployment

Record unemployment among China’s young people stems partly from a mismatch between their majors and available jobs, Goldman Sachs analysts said in a report Monday.

Graduates from vocational schools studying education and sports rose by 20% in 2021 compared to 2018 — but the education industry’s demand for new hires “weakened meaningfully during the same period,” the analysts said.

Regulatory changes wiped out jobs in after-school education in 2021. Around the same time, policymakers cracked down on internet tech companies such as Alibaba and real estate developers.

That “likely contributed to the weakening of labor demand” in information technology, education and property — industries that also tend to hire more young workers, the Goldman analysts said.

Their research found that information technology saw one of the largest increases in graduates between 2018 to 2021.

On the other hand, equipment manufacturing saw the largest increase in demand for workers, but little growth in new graduates, the report showed.

Chinese factories have faced worker shortages as young people choose to pursue other fields.

Such mismatch in majors and available jobs comes as China’s overall growth has remained sluggish, even after the end of Covid controls late last year. China’s top leaders said at a regular meeting in late April the economy lacked “internal” drive.

The unemployment rate for people ages 16 to 24 hit a record high of 20.4% in April — remaining persistently higher than the overall jobless rate of near 5% for all people living in Chinese cities.

Uncertainty about future income also kept retail sales muted.

Young people account for nearly 20% of consumption, the Goldman report said, with the analysts warning that youth unemployment could remain high in the coming years.

They estimate China has about 3 million more unemployed 16 to 24-year-olds versus before the pandemic.

Chinese authorities have repeatedly said that addressing youth unemployment is a priority.

Policymakers are trying to expand vocational training, pointed out Keyu Jin, author of “The New China Playbook: Beyond Socialism and Capitalism,” which was published this month.

Another area of opportunity is to expand the services sector, which accounts for just under half the jobs in China, far lower than the roughly 80% in Japan and the U.S., Jin said in a phone interview Monday.

She said she is more concerned about unemployment — a labor force “unable to be deployed” — than China’s aging population.