China’s job market remains fragile. Consumer spending hasn’t kept pace with the broader recovery in economic output. Debt levels, already a problem before the pandemic, grew at their fastest pace in more than a decade during the first nine months of 2020, while asset bubbles in stocks and real estate kept growing. China’s central bank faces a tricky balance between reining in stimulus without causing growth to sputter.

And now, a resurgence of Covid-19 infections in some parts of China, combined with a slow rollout of vaccines, is raising fresh worries about the outlook. At a minimum, Beijing’s plan to limit travel during the coming Lunar New Year, which falls on Feb. 12, will likely hit consumer spending, economists say.

All this matters because China is becoming a bigger part of the global economy, and a more important driver of growth world-wide. If its performance in 2021 disappoints, it could hurt everyone, from car brands to gadget makers to soybean farmers who are counting on Chinese demand.

Economists generally are sticking with their forecasts that China’s economy will grow around 8% this year after expanding 2.3% in 2020. But many see risks, especially if Covid-19 proves hard to contain or consumer confidence doesn’t improve.

A key factor to watch, economists say, is the job market, and its effect on spending. While China’s urban unemployment rate recovered quickly last year after hitting an all-time high last February, many economists believe the current rate of 5.2% understates the damage Covid-19 did.

Many urban workers are still clocking fewer hours and earning less than before, despite holding on to their jobs. Others, including college graduates and those who lost jobs due to Covid-19, are struggling to find opportunities with good pay. Income growth remains weaker than before the pandemic.

All of that has made many Chinese consumers wary about spending too much, which helps explain why retail sales fell 3.9% last year.

“The No. 1 constraint on consumption so far is really the relative underperformance of the labor market,” said Houze Song, a Chicago-based research fellow at the Paulson Institute.

It is still challenging for people like Sun Yin, who went looking for a new job in human resources after learning last summer that her former employer, a U.S. airline company, had plans to lay off thousands globally.

“I didn’t get a single interview opportunity during the first three months,” said Ms. Sun, a 30-year-old living in Shanghai who says she applied for more than two dozen openings. She remained jobless from last October until the last week of January, when she accepted a five-month job with slightly lower pay as a saleswoman filling in for an employee on maternity leave.

“The job search felt like going through an endless tunnel, even though I kept lowering my bar,” she said. She also stopped dining out and cut down spending on clothes.

As in other countries, job prospects are weakest in China’s service industries, including restaurants and hotels that still don’t need all of their previous employees.

That especially hurts China’s close to 290 million migrant workers, who make up 37% of China’s total working population. About half of them work in services.

Last year, China lost more than 5 million migrant-worker jobs, compared with a gain of 2.4 million in 2019 and around 4 million each in 2016 and 2017, when growth was stronger, according to Wind, a data provider.

Meanwhile, a record 8.7 million college students are expected to graduate this year in China. Wan Ziqing, a 21-year-old senior studying environmental design at Tongji University in Shanghai, says she was left empty-handed after months of job searching.

“All my applications felt like they were falling on deaf ears,” said Ms. Wan, who is eager to work at a large internet company.

Another important factor to watch is how China handles its stimulus. Now that factories are humming again and stores have reopened, authorities are speaking more openly about the need to rein in credit and warned of the risks associated with rapidly rising debt levels. But the latest pandemic outbreaks may prompt the central bank to be cautious about tightening policies.

Chinese brokerage firm

Huatai Securities

says localized outbreaks could drag economic growth down by 3 percentage points in the first quarter, though growth should still be strong compared with last year when the pandemic was first breaking out.

Some economists predict Beijing may tolerate a period of subdued growth given the need to contain debt. China is unlikely to set a numeric growth target this year as it attempts to curb credit risks further, said

Bruce Pang,

head of macro and strategy research at China Renaissance Securities Hong Kong.

“One common worry among investors is that China’s economic lead last year may not last,” he said.

Write to Stella Yifan Xie at stella.xie@wsj.com