Commuters cross a street in the business district of Central in Hong Kong, China, on Monday, Aug. 18, 2014. Slowing economic growth and rising unemployment in Hong Kong may stoke more unrest in the city, which is grappling with a debate over how to pick its next leader in 2017. Photographer: Brent Lewin/Bloomberg

China may have recorded its worst annual growth rate in nearly a quarter of a century but the country’s leadership does not appear too worried.

“The national economy has been running steadily under the ‘new normal’, showing good momentum of stable growth, optimised structure, enhanced quality and improved livelihoods,” Ma Jiantang, head of China’s National Bureau of Statistics, said on Tuesday as he revealed the economy had grown 7.4 per cent last year, the slowest pace since 1990.

The main reason for the nonchalance is the fact that job creation and wage growth in China are both chugging along steadily, even as the economy slowed from 7.7 per cent growth in both 2012 and 2013.

China created 13.22m jobs last year and this, combined with the fact the slowdown has so far been gradual, has convinced the Communist party it can allow growth to slow further.

Overall employment pressure is also fading because China’s working-age population peaked in 2011 and is expected to fall at an accelerating rate in the coming years, thanks largely to the decades-old one-child policy.

China’s working-age population fell 3.71m last year, after falling 2.44m in 2013.

But China’s official unemployment statistics are the worst of a notoriously unreliable set, raising a worrying question over whether Beijing’s sang-froid is misguided.

The country’s official jobless rate has remained unchanged, at 4.1 per cent, for the past five years.

It has fluctuated in a tiny band between 4.0 per cent and 4.3 per cent for the past 13 years, a period in which the quarterly year-on-year GDP growth rate was as high as 14 per cent and as low as 6 per cent.

The government itself acknowledges this number is not credible and has for many years gathered its own internal data, which it periodically announces but does not regularly publish.

On Tuesday, in response to a question from the Financial Times, Mr Ma said these internal “non-published” data put the real jobless rate in China at 5.1 per cent last year.

The debate over China’s real unemployment rate is not just academic.

Since at least 1989, Beijing’s top priority has been to create enough jobs to maintain social stability and head off popular uprisings that could overthrow the authoritarian state.

As recently as 2011, the government regarded 8 per cent annual growth as a quasi-mystical threshold, below which Chinese society would descend into chaos and the Communist dynasty would implode.

Thanks to a much larger base, less pressure from demographics and a gradual shift in the economy away from heavy industry towards labour-intensive services, the government’s new growth threshold is somewhere between 6.5 per cent and 7 per cent.

“The [official, published] unemployment rate is based on the number of people who register as unemployed but most people who lose their jobs in China have no incentive to register,” says Ding Dajian, associate professor at People’s University School of Labor and Human Resources. “In the worst years, the government was not willing to publish the [more accurate internal] unemployment rate, which scholars estimated as high as 20 per cent. Now pressure in the labour market has really moderated so it is a very good time to announce the real unemployment rate.”

Some analysts believe the internal figure revealed by Mr Ma on Tuesday is still too low.

The Economist Intelligence Unit released a report last week, based on research conducted with the IMF and the International Labour Organization, in which it estimated China’s real unemployment rate in 2014 was actually 6.3 per cent.

That was higher than both the UK, which the EIU estimated had an unemployment rate last year of 6 per cent, and the US, at 6.2 per cent.

The picture is complicated further by the 274m rural migrant workers who power China’s economy but are almost entirely ignored by unemployment statistics.

When most migrant workers lose their jobs they return to their homes in the countryside.

Since these people can generally grow enough food to survive, this serves as a safety net in the case of mass unemployment of the kind China saw in late 2008 and early 2009.

On the other hand, these people are severely underemployed and returning to the farms often pushes them back into abject poverty.

China’s slowdown is expected to continue this year, with problems particularly concentrated in the real estate construction, manufacturing and heavy industrial sectors, all of which are suffering from chronic overcapacity.

“As the property downturn persists and further weighs on growth in 2015, employment will likely come under pressure,” says Wang Tao, chief China economist at UBS. “We expect job losses to be less severe in scale, though more protracted in length, relative to 2008-2009.”

For now, China’s leaders appear relatively sanguine about the potential for massive lay-offs and accompanying social unrest.

But if the government’s own internal unemployment figures are not accurate then the risks of miscalculation amid the slowdown only increase.

Additional Reporting by Gu Yu

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