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Is China’s rapid economic slowdown already back to recovering? A new report showed that its manufacturing activity unexpectedly expanded in March to the fastest growth in eight months. It always seems more than fair to question economic reports out of China, but much of this is a private sector report.

The Caixin/Markit Manufacturing Purchasing Managers Index (PMI) rose to 50.8 in March. A poll of Reuters’ economists had indicated that the report would come in at 49.9 for the second straight month, and readings above 50 represent expansion.

While the report is consistent with only a marginal pace of improvement, the broad index reading was the highest seen since July 2018. What may stand out here, after looking at the entire report, are the implications that this has for the manufacturing sector’s employment rate.

The report showed that new orders were at a four-month high, and new export orders returned above the growth line. Production and total new work both increase at quicker rates, and the report showed that employment in the manufacturing sector expanded for the first time in over five years.

The Caixin China General Manufacturing PMI report said:

Firmer demand conditions led to a softer fall in purchasing activity, while inventories of inputs rose slightly for the first time since last November. Average input costs rose slightly, though companies generally passed this on to clients in the form of higher selling prices. Sentiment regarding the 12-month business outlook improved to a ten-month high, amid hopes of further improvements in market conditions.

And on the employment gains, the report said:

Staffing levels at goods producers increased during March, to mark the first expansion since October 2013. Some firms mentioned hiring additional workers to support greater production and new business developments. Staff hiring also coincided with sustained signs of stretched capacity at manufacturers, as outstanding workloads continued to rise at a moderate pace.

Dr. Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group, further said about the employment gains:

The output subindex continued to rise in expansionary territory. The employment subindex surged to a high not seen since January 2013. Data from the National Bureau of Statistics showed that the surveyed unemployment rate in urban areas for February was the highest since early 2017, causing concerns about the job market. The situation improved significantly in March, indicating easing pressure on employment.

Now we just have to wait and see what sort of numbers come in if and when a trade deal with the United States comes to pass.

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