April 04, 2006

China Peak II

A year ago today, I wrote about the PRC's coming labor shortage, linking to a story in the NY Times a day before. Here I am, exactly 1 year later, linking to another NY Times story, itself a year after the prior one, examining how the PRC's labor shortage is growing. They're starting to have to recruit for labor, increase wages, provide better working conditions, offer improved benefits, and are still having trouble meeting their labor force needs.

This is an economy that is moving into the frothy part of the business cycle. A year or two of labor shortage, businesses making worse and worse decisions in order to keep the labor pipeline going, and the inevitable crash will start.

The government is terrified of this, of course. In fact, all governments are terrified of this. When the PRC crashes, it's very likely to land hard. The PRC government will want to avoid the creation of all those angry, newly unemployed workers that a recession would cause so they're very likely to worsen the crash by trying to delay it, making the eventual dislocation even worse.

If you can, save. If you can't, save anyway. It's going to be bad.

HT: The Glittering Eye

Posted by TMLutas at April 4, 2006 02:00 AM