Early June data show unemployment to rise further; fall in labour participation aggravates

Unemployment continues to rise unabated. The 30-day moving average unemployment rate rose to 13 per cent on June 6, 2021 from 11.9 per cent in May as per CMIE data, indicating worsening of the situation further. Not only that, the labour participation rate fell further to 39.7 per cent from 40 per cent during the same period, showing lesser number of jobs available in the market. Employment rate has also fallen from 35.3 per cent to 34.6 per cent.

It is the worst condition since total the nationwide lockdown of April and May 2020 when all economic activities except essential ones were shut down. The last four weeks have been particularly hard for the Indian labour market. Labour market conditions deteriorated sharply during this period.

Labour participation rate had begun falling from the week ending May 16. During this week, the labour participation rate was at 40.5 per cent, only 0.1 per cent higher than the average 40.4 per cent. It was the rate at which labour participation in the labour market have been hovering for quite some time.

However, the unemployment, which was almost stable for several weeks at around 8 per cent, shot up at to an alarming rate of 14.5 per cent. This sudden rise was indicative of the fact that large number of people had lost their jobs.

The situation worsened further next week ending on May 23, when the unemployment rate shot up to 14.7 per cent. This happened even as the labour participation rate declined to 39.4 per cent. It indicated that unemployed people searched for jobs but could not find one.

The data for the last two weeks show that such an exceptionally high unemployment rate has apparently discouraged labour force from looking for work. It reflected in the labour participation rate which further came down. The high unemployment rate and low labour participation rate has brought down the employment rate to a one year low of 33.6 per cent, the lowest since the week ending June 7, 2020.

It may be mentioned here that the week ending May 20, 2021 registered a slight recovery when the unemployment rate fell to 12.2 per cent from a peak of 14.7 per cent just one week before. Despite this sharp recovery, labour participation rate fell to below 39 per cent from 39.4 per cent in the previous week.

It showed that labour force was still hopeless, and either they could not find new jobs or they just abandoned their efforts to search for one.

This further resulted into rise in unemployment rate next week that ended on June 6 when it reached to 13.6 per cent. The average labour participation rate over the three weeks ended June 6 was 39.2 per cent. The fall is consistent, making it a matter of serious concern.

The employment rate fell from 36.8 per cent in April 2021 to 35.3 per cent in May 2021, which means 15.3 million jobs have been lost during this period.

In the week ending on June 6, it fell to 34.6 per cent, measured by the 30-day moving average on June 6. However, the weekly average was much worse at 33.9 per cent. It means that job losses continued.

Employment has been falling since January 2021 when it had touched a recent peak of 400.7 million. It has fallen in each of the four months since then. It fell by 2.5 million in February, 0.1 million in March, 7.4 million in April and then by 15.3 million in May.

The cumulative loss since January therefore is a substantial 25.3 million. This is a significant 6.3 per cent fall in the employed workforce over a four month period.

The situation, however, may improve now with opening up of the economy after recent lockdowns. Due to lockdowns in May, nearly 17 million daily wage labourers and small traders such as hawkers lost employment. They may find employment after market opens.

However, what is of serious concern is that there has also been a steady fall in the employment independent of the lockdowns. The total non-farm jobs lost since January 2021 works out to 36.8 million. Of this, daily wage labourers account for 23.1 million. Salaried employees account for 8.5 million and the rest are entrepreneurs.

It would take a strong recovery of the India economy to recover the remaining jobs or revert to the employment levels of 2019-20. The unlocking process can be expected to repair about two-thirds of the job losses associated with the lockdown of May 2021. That would be 17 million out of the 25 million non-farm jobs lost during the month.

It may be mentioned here that unemployment in the country has been fluctuating in 2020 every month. It was because people got jobs one month and lost them in the next. There was no stability in the job market.

Unemployment rate in January 2021 was 6.52 per cent which rose to 7.97 per cent in April. By the week ending on May 9, it rose to 8.7 per cent, by May 16 it shot up to 14.5 per cent, and the next week on May 23 it was even higher at 14.7 per cent.

Unemployment rate has been rising sharply both in the urban and rural areas. Urban unemployment rate entered the double-digit zone on May 6 when its 30-day moving average rate was 10.2 per cent. It has been rising steadily since then. By May 20, it touched 12 per cent and as of May 23, it was 12.7 per cent.

Sharp rise in rural unemployment in recent times is also a matter of serious concern because it is an unusual phenomenon. Its sharp ascent began in the beginning of May 2021. On May 1, it rose to 7.1 per cent as against 6.2 per cent on April 1. The next week by May 7, it fell to 6.7 per cent but again started rising sharply. By May 23, it reached 9.7 per cent.

(IPA Service)