(Bloomberg) -- China’s labor market worsened in May with a record number of young people out of work and joblessness in major cities surging to an all-time high. 

While the government reported a drop in the nationwide urban unemployment rate -- to 5.9% in May from 6.1% in the previous month -- several other gauges show a dire situation.

The jobless rate for those between the ages of 16-24 -- which captures graduates from school and college -- rose slightly to 18.4%, the highest level since the data was first released in 2018. The rate is more than three times overall unemployment.

The jobless rate in 31 major cities also jumped to a record high of 6.9%, surpassing the peak of 5.9% reached during the initial Covid outbreak in 2020. The 31 cities include the municipalities directly under the central government, provincial capitals and autonomous region capitals. 

Labor market stress will likely worsen this year, with a record 10.76 million of graduates entering the labor market in the summer. The government’s Covid Zero strategy also means cities may get stuck in a cycle of disruptive shutdowns and tentative reopenings, resulting in an unstable economic outlook.

“For policy makers, zero-Covid at the cost of surging unemployment is a hard sell politically,” Larry Hu, head of China economics at Macquarie Group Ltd., wrote in a note. “Therefore, they are set to step up policy supports in the coming months to save the labor market.”

Joblessness is a major concern of policy makers as the Communist Party heads for a crucial leadership meeting later this year. Premier Li Keqiang told thousands of local officials at an emergency meeting in late May that the spike in the jobless rate would bring about grave consequences, and the rate must drop in the second quarter.

Fu Linghui, a spokesman of the statistics bureau, told reporters Wednesday that the ability of businesses to absorb employment has declined following the disruptions to production and operations. Youth unemployment remained high given the inclination of young people to seek stable positions, he said.

“The adverse impact of the pandemic on employment has not been completely eliminated, with the overall unemployment rate staying at a high level,” he said.

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There was some signs of improvement for migrant workers, with the unemployment rate for that group falling to 6.2% from April’s 6.6%, official data showed. 

China aims to create more than 11 million urban jobs and and keep the surveyed jobless rate under 5.5% this year. It’s created 5.29 million new urban jobs in the first five months of the year, hitting about 48% of the annual target, data from the statistics bureau showed. 

(Updates with additional detail)

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