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ANALYSIS

Employment situation grim in April 2018

by Mahesh Vyas

The employment situation continues to remain grim in the country. The unemployment rate remains elevated although it moderated a bit in April and labour participation and employment rates are around their lowest levels.

The unemployment rate fell to 5.9 per cent in April 2018 compared to the over 6 per cent rate seen in the preceding two months. The unemployment rate, however, continues to remain high compared to the levels a year ago when they ranged closer to 4 per cent.

The fall in unemployment rate in April is a surprise because the month began with rising unemployment rates of over 7 per cent. But then, the rates moved decidedly lower in the second half of the month.

Labour participation rate declined in April 2018. At 43.1 per cent the LPR in April was among the lowest. In the past 28 months, ie since we began measuring the LPR, this was the second-lowest LPR level.

The low LPR and high unemployment rate combine to give us a low employment rate in April 2018. The employment rate was 40.7 per cent during the month. This is a small improvement over the 40.5 per cent level of March 2018. But, March and April this year mark the lowest employment rates recorded since January 2016 when we began these measurements.

The estimated employed persons in the country was 403.2 million and the unemployed who were actively looking for a job during the month was 25.1 million. An additional 9.5 million were unemployed and willing to work but were not actively looking for a job. The total workforce willing to work and was waiting for jobs to become available therefore was of the order of 35 million.

We also know that large numbers of labour force quit the labour markets post demonetisation and have not returned to the labour markets. It is likely that when conditions improve these could come back. If we add these, then the workforce that is willing to work but does not have a job is much larger.

The growth potential in the unemployed workforce therefore is tremendous.

But, the current situation is sombre, particularly in urban India.

News from across the country show that the number of applicants for a single job often runs into several thousands.

Although the overall unemployment rate fell in April, it rose in urban India - from 6.5 per cent in March to 6.6 per cent in April. Labour participation rate fell from 41.1 per cent to 40.8 per cent. And, the employment rate fell to its lowest level of 38.1 per cent.

The employment rate had touched a new low of 38.4 per cent in March 2018 itself. However, in April, it fell further to 38.1 per cent. This indicates that only about 38 per cent of the people who are of a working age - ie more than 15 years - are actually working. In September 2016, over 41 per cent of such people were working.

Employment in urban India fell to an 11-month low in April 2018. The month’s data also seems to suggest a pause in the growing employment in urban India seen in the preceding six months. This rising employment had stabilised the employment rate at around 40 per cent after seeing a fall in the preceding months.

The fall in the unemployment rate in April and also the rise in the labour participation rate during the month is limited to the rural regions of India. The unemployment rate fell from 6.1 per cent in March 2018 to 5.5 per cent in April and the labour participation rate rose from 44.3 per cent to 44.4 per cent. As a result, the employment rate improved in rural India from 41.6 per cent to 42 per cent.

Nevertheless, rural India also faces a steady fall in the employment rate. At around 42 per cent this is over 100 basis points lower than the levels seen about a year ago.

CMIE completed its thirteenth Wave of Consumer Pyramids Household Survey (CPHS) on April 30. Data for April used above are from this Wave and these are provisional. All data for January 2018 through April 2018 that comprises the thirteenth Wave will be revised and finalised during the coming 15 days. Thus, the above numbers would change marginally but, it is unlikely that the data will change the basic narrative of employment / unemployment situation in India in April 2018.