The week ended October 17 was remarkable as
it saw a fall in the unemployment rate.
We have not seen such a level in any monthly
estimate of the employment rate since March 2020, Mahesh Vyas points out.
An
extraordinary September saw 8.5 million additional people being employed.
Recent history tells us
that gains in employment made in a month are easily wiped out in subsequent
months and the net gain over a few months turns out to be negligible.
If such a trend were to
continue, a significant part of the jobs created in September could just come
unstuck in October.
However, there seem to be
good enough reasons to believe that October would also see an expansion in
employment.
Of course, there is still
some catch-up to do to match the employment India provided in 2019-2020.
India provided 406.2
million jobs in September 2021 compared to 408.9 million in 2019-2020. But, the
prospects of breaching the 2019-20 level are bright.
Firstly,
the September spurt was not a growth in agricultural employment implying that
unlike in the recent past this was not merely disguised unemployment.
Secondly, although the
increase in employment in September was disproportionately higher in rural
India, it was also palpable in urban regions where nearly 2 million jobs were
added.
This makes the growth in
employment more widespread and, therefore, sustainable.
Finally, the increase in
employment in construction and food industries seen in September is likely to
be more sustainable than the gains seen in August which were essentially in
personal non-professional services (which are largely poor quality jobs) and
retail trade (which could not be sustained in September).
The week ended October 3
was disappointing. But, the week ended October 10 clawed back much of the
ground lost earlier and then the week ended October 17 saw a major recovery.
We watch the weekly
releases of three key labour market ratios to assess the current labour market
conditions.
These are labour
participation rate, unemployment rate and the employment rate to see how the
post-September period is unfolding.
Kindly
note the image has only been published for representational purposes. Photograph: PTI Photo
Compared to the 6.9 per
cent unemployment rate of September 2021, the first three weeks that ended in
October pencilled elevated unemployment rates.
In the week ended October
3, it was 7.6 per cent.
It then scaled up to 8.9
per cent in the week ended October 10 before falling back to 7.3 per cent in
the week ended October 17.
The unemployment rate has
remained elevated in the first half of October 2021. But, this is not a cause
of much concern because the other two ratios are doing very well.
The labour participation
rate (LPR) was 40.7 per cent in September 2021.
This was the highest LPR
level in a year. But, the end of September and early October gave a minor
scare.
The LPR fell to 39.2 per
cent in the week ended October 3.
This is an exceptionally
low LPR. But, it was quickly reversed with the LPR bouncing back to 40.4 per
cent in the week ended October 10 and then to an impressive 41.6 per cent in
the week of October 17.
The week of October 3 was
an exception to a trend that suggests that the LPR is rising.
If this trend continues,
and it is unlikely that it would, then the LPR is likely to be comparable or
higher than the 40.7 per cent pencilled in September.
It may be fair to assume
that the LPR will rise in response to the current festival season and also because
of the proximity to the harvest season.
The week ended October 17
was remarkable as it saw an increase in the LPR and a simultaneous fall in the
unemployment rate.
This translated into an
increase in the employment rate (ER), which rose from 36.8 per cent in the week
ended October 10 to 38.5 per cent in the week ended October 17.
An ER of 38.5 per cent is
impressive compared to levels seen recently.
We have not seen such a
level in any monthly estimate of the ER since March 2020. In the past year, such
a level was breached only twice in weekly estimates.
The spurt in the LPR and
the ER give additional reasons to expect October to see a consolidation of
employment gains seen in September, or even a small expansion.
The week ended October 17
reported better ER than in the month of September in both rural and urban
regions. The story is better in urban India.
In urban regions, the ER
was 35 per cent in the week ended October 17 compared to 34.8 per cent in
September.
More impressively, the
30-day moving average of the ER in urban India as of October 17, at 34.7 per
cent, was higher than the September ER of 34.6 per cent.
Even the 30-day moving
average unemployment rate at 7.9 per cent in urban India was lower than it was
in the month of September when it was at 8.6 per cent.
In rural India, while the
week of October 17 was better than the month of September, the 30-day moving
average as of October 17 was trailing the average for the month of September.
The rural employment rate
during September was 39.5 per cent.
The 30-day moving average
as of October 17 was lower at 38.9 per cent.
The coming harvest season
could improve this towards the end of October.
Given this
recent rise in the ER and prospects of its further consolidation, it is likely
that employment could expand marginally in October.
Mahesh Vyas is CEO and MD, CMIE P Ltd.