Labour demand in China increased in March as the construction sector revved up again after the lunar new year lull. This was the strongest March reading in three years for the FTCR Labour Market Index, despite cooling demand from the manufacturing and service sectors. Hiring managers were also more confident in their expectations of demand for workers in the coming month. 

Despite the distortions created by the lunar new year holiday, our labour index readings for the first quarter suggest a robust start to 2018. That said, tighter credit availability and environmental curbs are expected to lead to slower economic growth, hurting construction sector demand with a potential knock-on impact on manufacturing and services. Furthermore, our survey indicates that pay conditions are loosening across all sectors. The March results found companies reporting that overall labour cost pressures remained historically weak, while monthly average wages fell. 

Of the three sectors under coverage, labour demand was strongest in construction for the first time since last March, with that sector’s sub-index surging 15.2 points to an 18-month high of 60.6. Demand for workers in the manufacturing and services sectors increased at a slower pace than last month. 

The FTCR Labour Demand Index rose 3.8 points month on month to a three-month high of 62.1. Increased construction sector demand helped offset a cooling in demand for workers in the manufacturing and services sectors. The demand index for the service sector slumped 10.5 points to 58, its lowest level since July 2016 (56.6). 

Our Labour Demand Outlook Index increased 5 points from February’s record low to 53.4, boosted by recovering demand expectations among hiring managers in the service sector. 

The FTCR China Average Wage Index fell for a second month, dropping 7.6 points to 58.3. The index was just below the average 58.8 points of the previous 12 months, with January’s spike increasingly looking like a blip. The average of actual reported monthly salaries from survey participants show wages continued to weaken. The average reported monthly wage for workers was Rmb3,908 ($623), representing a 7.5 per cent fall from the average reported in February and a 9.7 per cent fall from last March.

The FTCR China Labour survey is based on interviews with 285 companies across the construction, manufacturing and service sectors. For further details click here. This report contains the headline figures from the latest Labour survey; the full results are available from our Database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.