Labour markets shrank for a second consecutive month in June 2025, and the unemployment rate rose. But the contraction was concentrated entirely in rural India, and in particular in non-farm rural sectors. The increase in the unemployment rate was also limited to the hinterlands. Urban regions, in stark contrast, did quite well in June. As a result of the opposite direction of changes in rural and urban regions, the unemployment rate in the two has converged.
Labour markets had contracted sharply by over 7 million in May. In June it shrank a further 0.4 million. But this smaller contraction in June is not a consolation at all. The labour market conditions have in fact, worsened. The labour force comprises of the employed and the unemployed who are actively seeking employment. Ideally, numbers of the former (the employed) should expand and those of the latter (the unemployed) should contract. In June 2025, however, the former contracted and the latter expanded.
In June 2025, India employed 3.4 million less people than it did in May 2025. And simultaneously, the number of unemployed swelled by 2.9 million. Apparently, most of the people who lost jobs continued looking for employment without finding any. This caused an increase in the numbers of the unemployed and also in the unemployment rate, which is the unemployed as a percent of the labour force.
Employment had peaked at 432 million in April 2025. But then it shed about 3 million in each of the following two months to reach 426 million in June 2025. The unemployed have numbered at around 35 million in the past eight months. This fell to about 32 million in May 2025, but it has climbed back to nearly 35 million in June 2025.
Although employment has fallen by 6 million in the past two months, the trend in the past five years is clearly one of employment being on the rise. On an average about a million jobs are added each month although the month-to-month volatility in this is very high.
Rural and urban regions charted very different paths in June. In rural India, employment shrunk, unemployment shot up, labour participation rate fell, and the unemployment rate went up. In urban India on the other hand, employment rose, unemployment fell, and the unemployment rate also fell.
Interestingly, the rise in the unemployment rate in rural India and the simultaneous fall in the same in urban regions has led to the two rates converging at around 7.5 percent. In recent months, the urban unemployment rate has been on a gently falling gradient while the rural unemployment rate has been more volatile. But the rural unemployment rate had fallen rather sharply in the past three months. June seems to have corrected this, and the rate has moved back closer to its mean.
The fall in employment in rural India was not in agriculture. It was limited to the non-farm sectors. The fall is also likely concentrated in the unorganised non-farm sectors.
June marks the onset of the monsoon. This is when sowing of the kharif crop gains momentum. This is expected to increase employment in agriculture. Rains had arrived early in May and had stalled soon after. But, during June, the monsoon precipitation was quite normal and kharif sowing was robust.
Labour markets data shows that employment in the agricultural sector in rural India increased by 1.7 million in June. But non-agricultural employment in rural India fell by a massive 8 million. This fall was concentrated in rural manufacturing and in rural construction industries. The services industries in rural India did not experience a fall in employment.
Rural India saw a handsome increase of a million salaried jobs in June. These are mostly relatively good quality jobs. Rural India also saw a fall among entrepreneurs and among small traders and daily wage labourers. These are mostly poor-quality jobs. So, the rise in employment in non-farm sectors in rural India is largely of the organised sector type the salaried employment and the fall is largely in the unorganised sectors such as small traders, daily wage labourers and entrepreneurs. The latter could be of the self-employed types.
Rural India lost a total of 6.3 million jobs in June. In contrast, urban India gained 2.9 million jobs in the same month. There was an in increase in employment among entrepreneurs, salaried employees, daily wage labourers and urban farmers.
Urban employment increased in urban industries, including in manufacturing and construction the big employers. Employment in urban manufacturing increased by 2 million and in the construction industry it increased by 1.4 million. However, employment in urban services industries fell by 1.8 million.
It is very likely that employment in the agricultural sector will increase in July. Sowing activities are expected to gain pace. It is also likely that the sharp changes seen in industry and services in the rural and urban regions would see some mean reversions. This could lead to a small increase in net employment in the non-farm sectors. As a result, the overall employment is expected to improve in July.
