It has been around for decades, and is conducted using a well-defined and validated methodology.

So It’s such a pity that the Manpower Employment Outlook Survey (MEOS) survey completely misses the point for China.

The study is infused with cautious optimism, and everything is ‘positive’ or at least ’steady’. Phrases like ‘considerable year-over-year improvement’ are used to create the impression that everything is fairly rosy in the garden in China. No need to be concerned.

Part of this may be the nature of the study and the main question that is given to respondents:

“How do you anticipate total employment at your location to change in the three months to the end of December
2008 as compared to the current quarter?” [My italics]

The result of this survey is called the Net Employment Outlook, and it basically tells you if hiring sentiment is improving, or dis-improving, compared to the last quarter. In doing that I think it may lose track of the actual situation on the ground because a slowly falling sentiment over a number of quarters is hidden by the passage of time.

The report concludes that quarter-over-quarter and year-over-year, the Outlook reported by Chinese employers has remained relatively stable. It only declined by 1 percentage point in each case.

When you compare to the previous quarter this year, the outlook is positive, at +12%. Compared to Q3 last year there is a slight 3 percentage point decrease. So the message is that everything is fine and there is no need to worry.

But a closer look at the MEOS report shows that the index has been declining steadily and consistently since the end of 2006. You can see this in the graph above.

I don’t wish to be too sarcastic here but if you can’t see the economic decline in growth in China from the graph, you might get a strong sense of it by watching the news. All you have to do is take your calculator and add up the total number of factories (tens of thousands), and jobs (hundreds of thousands) that have been lost this year in China.

In the Real World

Many international firms in China are already on full hiring and travel freeze. Some companies are willing to replace people who have resigned but some cannot even accept this. The stability in the MEOS numbers completely fails to acknowledge the fear and confusion that are stalking many business people in China.

Local companies are faring worse and have been for at least a year. Increases in labor and materials costs have hit local Chinese companies so hard that we are seeing tens of thousands of factories close. Most of the remaining companies are scared and unprepared. They have known nothing but a rising tide that raises all boats for about 10 years, and probably have no real contingency plan for a time when China is not on it’s way to becoming the World’s Leading Economy.

In response the government has restored some of the export rebates, reduced taxes, encouraged stock purchases, lowered interest rates, and invested RMB292 billion in rail networks, but most pundits agree that allowing low-tech local Chinese companies to fail is part of the overall government plan. The logic is that these low tech firms have to fail to make room for higher technology companies to take over.

Headhunters are faring worse than their client companies because they are hit before the companies themselves. Once the hiring freeze kicks in they have no more business coming in, and I have already seen a couple of companies collapse.

What was that line about Lies, Damn Lies, and Statistics?