Reuters

The night before China`s civil service exam, Melody Zhang anxiously paced up and down the corridor of her dormitory, rehearsing her answers. Only when she got back to her room did she realise she had been crying the whole time.

Zhang was hoping to start a career in state propaganda after more than 100 unsuccessful job applications in the media industry. With a record 2.6 million people going for 39,600 government jobs amid a youth unemployment crisis, she didn`t get through.

"We were born in the wrong era," said the 24-year-old graduate from China`s top Renmin University.

"No one cares about their dreams and ambitions anymore in an economic downturn. The endless job-hunting is a torture."

A crisis of confidence in the economy is deterring consumers from spending and businesses from hiring and investing, in what could become a self-feeding mechanism that erodes China`s long-term economic potential.

China grew 5.2 percent last year, more than most major economies. But for the unemployed graduates, the property owners who feel poorer as their flats are losing value, and the workers earning less than the year before, the world`s second-largest economy feels like it`s shrinking.