India’s unemployment rate declined from 8.5 percent in August to 7.8 percent in September 2024. But, so did the labour participation rate and more importantly the employment rate. The labour participation rate fell from 41.6 percent to 41 percent and the employment rate fell from 38 percent in August to 37.8 percent in September.
A fall in the unemployment rate is usually a good sign. But, it is usually not so when it is accompanied by a fall in the labour participation rate and certainly not when it is accompanied by a fall in the employment rate.
The employment rate is, perhaps, the most important labour market metric for a developing country like India. It denotes the proportion of the working age population that is employed. This proportion was well over 40 percent before the Covid-induced lockdowns. It continues to remain much lower than that. While the employment rate is rising, it seems to do so quite slowly.
For three consecutive years from 2020-21 through 2022- 23 the employment rate remained short of 37 percent and in 2023-24 it was 37.1 percent. During the three quarters of calendar 2024, the employment rate was just short of 38 percent 37.9, 37.8 and 37.8 percent. The employment rate crossed 38 percent in the months of December 2023, March 2024 and August 2024. But, it seems to fail to consolidate into an employment rate of 38 percent.
A fall in the employment rate is often associated with a fall in employment. In September 2024, employment fell by 1.5 million from 417.7 million in August to 416.2 million.
This is a small fall of less than half a percent. But, a fall in employment itself is distressful.
Beyond these aggregate values, there lurks a bigger pain point and also a silver lining. The 1.5 million fall in employment in September is the result of agriculture shedding 14.5 million jobs. This is a very large number. To place this in perspective it is the sum of the total employment in the food and textiles manufacturing industries. So, the fall of employment in agriculture in September was the equivalent of the entire food and textiles manufacturing industries laying off all their employees in the month.
A bigger problem is that such large shedding of employment is not unusual in agriculture in India. In October 2023 and January 2024 agriculture shed over 18 million jobs. The sector also absorbs such quantities of labour in other months. But, it is distressful that the employment of such large numbers should be so vulnerable to the agricultural activities and not have any certainty of their ability to earn stable wages.
Some of these lost jobs were absorbed in the construction industry which saw an increase in employment of 5.7 million during September. Construction also offers informal and vulnerable employment.
The silver lining is that manufacturing industries added 6 million jobs in September 2024. This took the total employment in manufacturing to a record 45.7 million. The additional jobs in manufacturing were spread across several industries. Metals added 2.2 million, chemicals added 1.7 million, cement and other construction materials added 1.6 million, textiles 1.3 million, utilities 1.3 million and food nearly 1 million. Pharmaceuticals, automobiles, handicraft and gems & jewellery shed jobs.
Many of the additional jobs may be classified as relatively good quality jobs. First, this is because manufacturing usually offers better quality jobs. It was the biggest contributor to the increase in jobs in September. Secondly, we see a healthy increase in salaried jobs in the month. These increased by 2.7 million. Salaried jobs are estimated at 96.3 million in September 2024. This is close to the peak of 96.4 million seen recently, in June 2024. Salaried jobs have been rising steadily and have remained mostly over 90 million in 2024. The average monthly salaried jobs in 2024 so far is 93.6 million. This is much higher than the average of 86.1 million seen in 2023.
While the rise in manufacturing jobs and in salaried jobs is a healthy development the very large volatility in agricultural employment is stressful. Farm labourers do not usually join manufacturing industries as salaried employees. The two phenomena are therefore quite independent although they occurred simultaneously. At the macro level the fall in the employment rate is a small worry because its trend has been rising gradually. At the sectoral level, the recent rise in manufacturing and salaried jobs is encouraging.
References: https://economicoutlook.cmie.com/ kommon/bin https://economicoutlook.cmie.com/ kommon/bin/sr
Author is MD and CEO of Centre for Monitoring Indian Economy Pvt. Ltd
