CMIE data shows unemployment rate crossed 8% in first three weeks of April; where are the jobs disappearing?
The escalation in April unemployment figures, as CMIE itself points out, weakens the optimism seen in the latter half of March, when data showed an improvement in the scenario
The unemployment rate averaged 6.9 percent in the first half of March but fell to an average of 6.3 percent in the second half
The April figures, which have averaged 8.1 percent in the first three weeks, put cold water on the optimism
The drag in the manufacturing sector is a direct result of poor investments and complicated land, labour sector reforms
In the first three weeks of April, the unemployment rate in the country showed a sharply increasing trend, coming at an average 8.1 percent, compared with an average 6.7 percent in the month of March and 7.2 percent in the month of February, according to data from Centre for Monitoring Indian Economy (CMIE).
In the first week of April, the rate was recorded at 7.9 percent, in the second week at 8.1 percent and in the third at 8.4 percent, the economy watchdog said citing the findings of its household survey. Now, how should one read these numbers? In the absence of any official estimates on the nation-wide status of employment/unemployment situation, research organisations such as CMIE becomes the only reliable source to assess the crucial job data.
In February this year, a Business Standard report had said that the National Sample Survey Office (NSSO) which conducts household surveys on employment situation wasn’t given permission to release job data that showed the country's unemployment rate at a 45-year-high of 6.1 percent in 2017-18.
The escalation in April unemployment figures, as CMIE itself points out, weakens the optimism seen in the latter half of March, when data showed an improvement in the scenario. The unemployment rate averaged 6.9 percent in the first half of March but fell to an average of 6.3 percent in the second half. The April figures, which have averaged 8.1 percent in the first three weeks, put cold water on the optimism.
An interesting finding of the CMIE data this time is that elections have given workers some reason to cheer as well. According to this, the labour force participation rate touched a recent peak of 44.3 percent in the week of 14 April. The average labour force participation rate during the first three weeks of April 2019 was 43.5 percent compared to 42.3 percent during the first three weeks of March 2019. This is a sharp jump, it said.
The labour participation rate started to rise in the third week of March, i.e. the week ended 24 March. CMIE attributes the increase in labour participation to the labour-intensive election campaigns, organising rallies and events. In the backdrop of CMIE findings showing a sharp rise in unemployment, it is imperative that the government doesn’t delay the official figures any longer to offer more clarity on the employment situation.
One needs to look at the unemployment figures in the context of what is going on in the real economy. For nearly a year now, the factory output has been struggling to revive, caused by a drag in the manufacturing sector and investment activity. The factory output (index of industrial production or IIP) numbers for February has shown a 0.1 percent growth in February as against 6.9 percent in the year-ago period. That’s the slowest growth in at least 20 months, data shows.
In June 2017, the IIP growth was contracted by 0.3 percent. In the April-February period, the IIP grew by 4 percent. During fiscal 2018 (April-February), the factory output had grown 4.3 percent. Of the multiple indicators that constitute the IIP, the manufacturing sector has disappointed the most, contracting by 0.3 percent in February 2019 compared with 8.4 percent in February 2018. That’s even more worrying because growth in the manufacturing sector is key for job creation.
The drag in the manufacturing sector is a direct result of poor investments and complicated land, labour sector reforms. Sadly, these two areas have been given very little attention by the Centre so far. The capital goods component in the IIP, which indicates investment activity, has been falling. In February, this segment contracted by 8.8 percent compared with a contraction of 3.4 percent in the previous month in the month before.
India will have to accelerate its manufacturing sector growth if it wants to create more employment opportunities; now read this with the unemployment figures. Coming back to unemployment figures, the CMIE had said that at 7.2 percent, the country’s unemployment rate in February was the worst in at least 29 months when labour force dwindled 25.7 million since September 2016. Going by the data available so far, April could be worse.
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