That’s about a percentage point lower than shown in official statistics so far this year, they said, with the expansion “trending down” since China reopened from the pandemic in early 2023.
“Our wage tracker suggests that sluggish wage growth may impose headwinds to consumption growth in the second half of 2025,” the economists said. “We anticipate incremental and targeted easing measures in the second half of the year to alleviate labour market pressures.”
China’s soft labour market and wage growth remain a key hurdle to a more sustained recovery in consumption, even after retail sales improved in recent months thanks to government subsidies for purchases of items like smartphones, home appliances and cars.
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Dim employment prospects also pose a substantial constraint for policymakers’ effort to ease intense price wars among industries, as consolidating and reducing production means more workers may need to be laid off. That’s why some economists say Beijing will take a gradual approach to rolling back excessive capacity.
In further evidence of weakening pay pressures in China, official statistics on the average annual salary among private enterprises showed an increase of only 1.7% in 2024 from a year ago.
But gauging the health of the Chinese consumer has become increasingly difficult after a decline in available independent data made it harder to assess labor market conditions, since official employment figures are often believed to underestimate the problem.
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To get around the dearth of data, Goldman Sachs recently revamped its wage indicator to incorporate statistics including the employment sub-gauges of various purchasing managers’ index surveys and payouts from China’s unemployment insurance funds, which can be claimed for jobless workers.
Those sets of alternative indicators replaced the discontinued wage data from one of China’s largest online recruitment platforms as well as delayed results of central bank surveys on household income and sentiment.
Apart from Goldman Sachs, other economists have also used PMIs to scrutinize the state of employment. Those surveys have split from the official jobless rate in recent years, with the former indicating sustained sluggishness while the latter remained largely steady.
Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics, said the divergence may stem from the fact that an increasing share of China’s labor force is self-employed or engaged in other types of informal work that’s not captured by surveys of large companies but still counted by the official statistics bureau.
Coupled with poor wage data, it shows people are increasingly being pushed into self-employment or flexible work because of a lack of formal jobs on offer, according to Gavekal’s report earlier this month.
“The data indicate that China’s labor market has been consistently weak, despite a broadly stable headline unemployment rate,” Cui said in the report. “Until the labor market truly tightens, it seems unlikely that household confidence will rebound.”
