Unemployment rate rising in December | Business Standard Column

Clipped from: https://www.business-standard.com/article/opinion/unemployment-rate-rising-in-december-122121900882_1.html

The unemployment rate was over 8% in all three weeks that ended in December

Mahesh Vyas

The unemployment rate is rising in India. It was high in November, at 8 per cent. After the lockdown shocks, the unemployment rate has hovered in the 6 to 8 per cent range. The 8 per cent unemployment rate of November was therefore at the higher end of this range. Earlier, in October too, the unemployment rate was close to the higher end of the range. The month had ended with an unemployment rate of 7.8 per cent.

Now in December 2022, the unemployment rate threatens to breach this upper end of the range observed since the lockdowns.

The unemployment rate was over 8 per cent in all three weeks that ended in December. The first week that ended on December 4 recorded an unemployment rate of 8.4 per cent. In the second week the rate shot up rather sharply to 9.5 per cent. In the third week, the rate scaled back a bit. But it was still significantly elevated at 8.9 per cent.

The four-week moving average of the weekly unemployment rate reveals a trend. The weekly rates are somewhat noisy as they tend to be a bit volatile. But the four-week moving average reveals an almost steadily rising trend since early October 2022. The four-week moving average unemployment rate in the week ended September 25, 2022, had reached its nadir at 6.1 per cent. Now, as of the week ended December 18, the four-week moving average reached its highest point of recent times at 8.6 per cent. (These are after the second lockdown period peaks and troughs.)

It is not entirely clear if this rising trend has any momentum. Therefore, we cannot claim that this trend will get any worse in the coming weeks. It, however, is a bit worrisome that the recent rise in the unemployment rate cannot be explained by the seasonal movement of labour in and out of agriculture. If this were to be the case, we would expect a quick correction. But, agriculture provides no alibi for the worsening unemployment rate around now.

The rabi harvesting season is progressing well. As of December 16, 2022, about 91 per cent of the normal area under the rabi crop was harvested.

The comparable ratio in the previous two years was about 88 per cent. In the two years preceding these, it was significantly lower than even that.

Agriculture is not the reason, but the unemployment rate in rural India is elevated. The average unemployment rate in rural India in the first three weeks that ended in December 18, 2022, was 8.4 per cent compared to the 7.6 per cent pencilled in November 2022.

Interestingly, while the rural unemployment rate is high, the rural employment rate is also high. The latter implies that rural India is able to provide more jobs than earlier, but the former implies that it is not able to provide adequate jobs.

The employment rate in rural India as of December 18 was 39 per cent. The average employment rate in the first three weeks of December was 38.6 per cent. These estimates compare very well with the 37.5 per cent employment rate in rural India recorded in November 2022. So, rural India, including agriculture, is absorbing many more people than it did in November. But, this is not enough to meet the demand from the rising labour participation rate (LPR), which has increased from 40.4 per cent in November to 42.2 per cent in the first three weeks of December 2022.

The elevated rural unemployment rate of 8.4 per cent in the first three weeks of December is much lower than the nearly 10 per cent unemployment rate in the same three weeks of the month in urban India.

Urban India had recorded an unemployment rate of 9 per cent in November 2022. It has seen an unemployment rate in excess of 9 per cent thrice in the past one year but it has not seen an unemployment rate of 10 per cent or more since the end of the second lockdown period in June 2021. It is unlikely that the urban unemployment rate will cross 10 per cent in December but it could come quite close to touching it.

The unemployment rate shot up to a record 10.9 per cent in the week that ended on December 18. The preceding two weeks saw the unemployment rate at relatively lower rates of 9.2 per cent and 9.7 per cent. But, even these were higher than the 9 per cent rate of November.

Like in rural India, the employment rate in urban India is also rising. In the first three weeks of December 2022, the average employment rate was 34.6 per cent. This is a shade higher than the 34.4 per cent employment rate seen in urban India in November 2022. This is not a great rise but if December closes with an employment rate of around 34.6 per cent it would be the fourth consecutive month of an increase in the urban employment rate.

The urban labour participation rate shot up sharply to 39 per cent in the week ended December 11. The rate continued to remain elevated at 38.8 per cent in the next week that ended on December 18. The urban LPR has been significantly high since the middle of November 2022. The average weekly urban LPR since the week ended November 20 works out to 38.4 per cent. This is much higher than the levels seen since mid-2020.

Weekly data suggest rising LPR in both rural and urban India and a rising employment rate. However, the increase in the employment rate is not adequate to meet the demand and so India sees a rising unemployment rate.The writer is MD & CEO, CMIE P Ltd

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