Chinese economic growth may have slowed to a six-year low in the first quarter of 2015, but one area that remained strong – the labour market.
Research released by Nomura overnight revealed the nations labour demand-to-supply ratio – the number of urban job vacancies to job seekers – remained firm in the first three months of 2015.
The ratio, calculated by the government based on a survey of 100 cities – was 1.12 for the quarter. In other words, for every 100 jobseekers there were approximately 112 jobs available.
While down on the record high of 1.15 struck in the fourth quarter 2014 the ratio remains in a uptrend, something that is clearly demonstrated by the chart below.
Normura believes that while the “could help raise the government’s tolerance of sub-7% growth” it also suggests that “potential (GDP) growth has slowed”.
In light of this Nomura believe China’s PBoC will continue to ease monetary policy aggressively this year. The forecast a further two 50bps cuts to the reserve ratio requirement – something that was slashed by 100bps last Sunday – along with three 25bps cuts to benchmark interest rates.
On top of one rate cut and two reserve ratio requirement cuts so far this year that’s aggressive.