Instant Alert: We're about to get a look at what is really going on in China

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We're about to get a look at what is really going on in China

by Rachel Butt on Apr 29, 2016, 4:54 PM

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You may have heard that China is on a tear right now. 

Lending in the country has exploded. The government has stepped up spending. Property-purchase regulations have been relaxed.

That all seems to be contributing to a pick up in activity in China's old economy, the one driven by building things. 

One way to track that kind of activity is by watching the PMI and non-manufacturing PMI, which track activity in China's factories and services sector every month.

The newest data will be out this weekend, and it could tell us a lot about the impact the stimulus is having on the ground in China. Both gauges are based on surveys of purchasing managers and shows how their business expectations have changed, including production, orders, inventories, jobs and prices.

It's worth digging deeper into the part of the PMI which focuses on jobs: the employment PMI and the non-manufacturing employment PMI. 

Both gauges have been on a downtrend trend for a while, creating a headache for Beijing which is counting on its services sector to offset its manufacturing weakness.

Factory jobs inched up last month but have been lingering below the 50 level mark, indicating a contraction from the previous month. Meanwhile, the services labor market nosedived in the first half of 2015, and hasn't recovered since the market meltdown that year. 

That does not bode well as China seeks to transition from heavy industries to a consumption-driven and services-led economy. Remember, China's labor market is the number one concern for the country's leadership. That is why this next reading of the PMI is so important. 

The China Beige Book for the first quarter painted a gloomy outlook for the Chinese jobs market. Only 23% of China's employers are expanding their workforce, according to the report. In contrast, 15% of the companies will shed workers.

We're about to find out whether the same doom and gloom shows up in the official employment PMI numbers.

If it does, there is likely to be trouble ahead. china employment PMI



 
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