Archives August 2008

HK jobless rate declines to lowest

HONG Kong’s employment continued to improve from May to July with the jobless rate dipping to 3.2 percent, the lowest level in a decade, according to latest statistics of the Census and Statistics Department released yesterday.

Declines in the jobless rate were recorded in the construction, transport and import-export trades from May to July compared with April to June, according to the department.

Total employment rose by 1,400 to 3,53 million while the labor force surged by 4,500 to nearly 3,66 million.

From May to July the number of jobless people rose by 3,100 to 124,600 while the number of underemployed grew by 2,100 to 69,900.

The department’s data also showed the underemployment rate remained stable at 1.9 percent from April to July.

Declines in the underemployment rate were mainly recorded in the decoration and maintenance, welfare and community services and sanitary services sectors, offsetting rises in the foundation and superstructure construction, and amusement and recreational services sectors.

The total labor force grew mainly due to fresh graduates and school leavers entering the job market, the department said.

With a relatively satisfactory absorption of these newcomers and increased job opportunities in the construction sector, the number of unemployed people only recorded a mild rise.

While welcoming the latest fall in the jobless rate, Secretary for Labor and Welfare Matthew Cheung said the Hong Kong government would do its best to promote employment on all fronts and help those adjusting to the increasingly knowledge-based economy through training, retraining and skill upgrading.

Surplus labor pool shrinking

China’s labor market is in the pincer grip of dwindling surplus labor on one hand and growing unemployment on the other as a result of mass closures of outdated factories.

Apparently contradictory, these two rising trends have come to define the labor market of late. Employers are finding it difficult to find suitable workers and employees are scratching heads in their search for ideal positions.

In terms of labor supply, which has long been seen as a factor in the nation’s economic miracle, China has already entered a complicated era of a dwindling workforce and a shortage of skilled workers.

But don’t panic.

Cai Fang, a senior think tank economist from the Chinese Academy of Social Sciences, assured the Chinese leadership while correcting the widely accepted perception that China’s labor supply is still endlessly abundant.

According to some economists, the number of surplus laborers in rural areas alone surpasses 150 million, equivalent to half of the US’s total population.

But Cai insisted that this figure was inaccurate. He said 52 million would be a more realistic estimate.

Cai reported the research result when China’s highest leaders lent their ears to the country’s top-level economists in July to find solutions to the current economic headaches.

“Our research finding has revealed that surplus labor is far less than we expected,” said Cai, who is also a member of the Standing Committee of the National People’s Congress.

The number of surplus laborers is declining in rural regions. Cai assured the leadership, currently puzzled by rising inflation, energy supply and possible economic slowdown, that by 2020, China’s labor supply would increase at an encouraging pace.

To ensure a healthier economy, Cai said China needs to upgrade its economic structure and further improve the treatment of laborers and equip them with new skills and knowledge.

As a result, the pro-business institutional and economic measures were introduced. And the companies involved, especially those in manufacturing, energy, information technology and agriculture, may get the lion’s share of R&D investment.

But these measures, which are aimed at sustaining this economic growth miracle, cannot necessarily lead to rosy employment prospects, especially for the poor. And since last year, the government has been determined to close the labor-intensive but energy-crunching factories. The closure plan will be extended to 2010.

The impact is obvious as many of China’s factories are labor-intensive. This is causing and will continuously result in unemployment, said Liu Junsheng, a senior researcher from the Labor-Wage Institute affiliated to the Ministry of Human Resources and Social Security.

The economic growth rate has slowed to 10.4 percent for the first half of this year, from 11.5 percent during the same period last year. The 1 percentage point drop means a loss of about 1 million jobs, Liu said.

“If the trend continues in the coming months, more workers will lose their jobs,” said Liu.

China created 6.4 million jobs in the first half of the year, which represented 64 percent of the government’s target of generating 10 million new jobs in 2008. Behind the figures lies the harsh reality: employment is not only a longstanding problem for job hunters but also a new headache for employers.

Finding a job is challenging in China and this year, has been extremely hard, as the country has experienced so many unexpected events.

The earthquake and snowstorms have closed down some enterprises. On top of that, at least 5.59 million students have graduated from colleges this year, 13 percent more than last year, and they face unprecedented pressure in the job market as about 700,000 graduates, who could not find work last year, will compete with them for employment.

Along with the steady rise in labor costs, factories and companies also face difficulty in finding “suitable hands” to feed the vacancies as some job hunters lack training. And for export-oriented companies, the appreciation of the yuan has exposed them to difficulties in expanding business.

Generally China has had strong economic growth but this has not been matched by equally strong job creation.

51job Chinese Recruiter Lowered

51job Inc.’s (JOBS) financial results for the second quarter showed a lower net profit margin due to higher sales and marketing expenses and a higher tax rate. Both its revenue and EPS missed the market consensus.

Although 51job continues to have the highest brand recognition in the online and offline recruiting markets in China, the leading position hasn’t gained any competitive advantage for 51job to improve its profit margin. Therefore, we are downgrading the stock from Buy to Hold.

China has 253 million internet users as of the end of June 2008. It has approximately 750 million workers now and more and more companies of different size begin to use low-cost online recruiting. This is a very positive tail wind environment in which to operate. Additionally, it is estimated that revenue of online recruiting services in China will reach RMB 2.63 billion in 2011. According to estimates, revenue of online recruiting services will amount for 45.3% of the total recruiting market in 2010.

Through a targeted sales and marketing strategy, 51job has been focusing on further building the ’51job’ brand as the ‘one-stop’ human resource services provider. Now 51job is the most famous brand in the recruiting market in China and this position has helped the company enter more profitable second-tier cities in China.

Using a P/E multiple of 18.2x our fiscal year 2009 earnings per ADS estimate of $0.70 yields a target price of $12.75, which can reflect company’s great growth prospects, in our view.

Beijing bar boss recruits Sichuan students

A businessman in Beijing has given fresh hope to a group of young women from Sichuan following the tragedy of the May 12 earthquake.

Singaporean Danny Chang, who has lived in China since 1997, opened a new bar “1/5” in east Beijing’s embassy area early last month.

“I was wondering what a businessman like me could do to help, apart from just donating money,” the 38-year-old said at his bar Monday.

Then a friend from Chengdu came up with the solution, he said: hire people from Sichuan.

“I thought it was really a good idea, so I flew to Chengdu immediately,” he said.

His friend took him to a job fair at Sichuan College of Education, where lots of students were looking for jobs.

After chatting with dozens of candidates, Chang chose 12 young women – mostly third-year students majoring in tourist management – and offered them one-year internships.

But the recruitment process was not all plain sailing for the generous bar owner.

With his left arm tattooed with a totem pole and his right draped with a dozen silver bracelets, many students mistook the 1.9-m-tall Chang for a gangster.

Henna, a 22-year-old from Deyang, Sichuan, who managed to land one of the jobs, said Monday: “At first, we all thought he was a mafia boss. Some of my friends even told me not to go, because they thought it might be a trap,” she said.

But Chang said he wanted to be honest and open with the candidates, which was why he did not cover up his arms.

As long as the applicants met the basic criteria, the jobs were offered on a first come, first served basis, he said.

“I was there to help people, not to be picky. If you have passion, you’re qualified,” he said.

The 1/5 interns work eight hours a day, six days a week. They can earn up to 1,000 yuan a month and also get free accommodation and meals.

But the internships are not about money or benefits, Chang said. They offer the girls the chance to learn about the industry and get some really useful work experience.

“They’ll learn about cash flow, hosting, bar tending and service, which are all really useful skills,” Chang said.

To help them acclimatize, Chang said he has also taken his newest workers out on shopping and sightseeing trips, and even to a club one Sunday night, his only day off.

He said he was impressed at how quickly some of them had picked up English, something he attributed to the nights they spent chatting to the bar’s foreign customers.

“They spoke little English when they arrived, but they are getting much better.

“In six months’ time, they’ll be confident enough to chat with people from anywhere in the world,” he said.