Alarming spike in unemployment rate in last 15 days

Employment has been falling sharply since January 2021. May 2021 could see over 10 million jobs lost. Amid worsening humanitarian crisis of hunger and malnutrition, does Modi govt have a roadmap?

Representational image
Representational image

Gyan Pathak

Every consecutive week of May 2021 brought higher rate of unemployment and a great humanitarian crisis underneath. The situation has been going from bad to worse month after month which crossed the terrible double digit mark in the week ending May 21 when it was 10.3 per cent for a month, and 14.7 per cent for the week.

It is abnormally high, similar to the situation in April-May 2020 when India was locked down putting brake to the economy and pushing unemployment rate above 23 per cent.

Unemployment rate moving into double digit again is indicative of the level of disruption in the Indian economy that the Covid-19 containment measures and the local lockdowns or restrictions are inflicting. It is a greater tragedy than the last year because the last 14 months have siphoned out and dried up sources of sustenance for majority of people. It presents a case of emergency response by the government.

Unemployment in the country have been fluctuating in 2020 every month. It was because people got jobs one month and lost in the next. There was no stability in the job market. Unemployment rate in January 2021 was 6.52 per cent which rose to 7.97 per cent in April. By the week ending on May 9 it rose to 8.7 per cent, by May 16 shot up to 14.5 per cent, and the next week on May 23 it was even higher at 14.7 per cent as per the latest CMIE data.

The sudden spike in unemployment rate in the last 15 days is alarming. In April 7.35 million jobs were lost in absolute term when month on month unemployment rate was even less than 8 per cent. May has already become more devastating with 10.6 per cent month on month average unemployment rate on May 26. The labour market in the country is thus crashing and may continue beyond May into June 2021.

Unemployment rate has been rising sharply both in the urban and rural areas. Urban unemployment rate usually remains higher than the rural unemployment rate, but the difference between the two this time is alarming. Urban unemployment rate has entered the double-digit zone on May 6 when its 30-day moving average rate was 10.2 per cent. It has been rising steadily since then. By May 20 it touched 12 per cent and as of May 23 it was 12.7 per cent.

May 2021 would thus witness a double digit rate for the first time since April-June 2020. It has been on the rise since early April 2021. On April 1, the 30-day moving average urban unemployment rate was 7.2 per cent. By May 1, it reached 9.6 per cent and then by May 23 it shot up to 12.7 per cent.

Sharp rise in rural unemployment in recent times is also a matter of serious concern because it is an unusual phenomenon. Its sharp ascent began in the beginning of May 2021. On May 1, it rose to 7.1 per cent as against 6.2 per cent on April 1. The next week by May 7 it fell to 6.7 per cent but again started rising sharply. By May 23 it reached 9.7 per cent.

In April, demand for work under rural employment guarantee scheme MGNREGA rose sharply, and 341 million man-days work had to be given as a support which was the highest since July 2020. Indications point to further worsening of the conditions in May and June 2021. It may be worth mentioning that the average unemployment rate in rural India has been around 6 per cent in recent years and the monthly unemployment rate rarely touched 8 per cent before the lockdown announced on March 24, 2020. The present 9.4 per cent rate is therefore high.

The steady and substantial rise in the unemployment rate in May 2021 is obviously because large number of people are losing their jobs week after week. On the other hand, no increase has been recorded in the labour participation rate (LPR) which could have also caused an increase in the unemployment rate. If the unemployment rate were to rise along with an increase in the LPR then it could be inferred that an increase in the unemployment rate is because there is an increase in the number of people who are seeking employment but are failing to find one.

But, this is not the case. The LPR has not risen perceptibly. Its increase is visible only at the second decimal place. The LPR was 39.98 per cent in April 2021. By May 23, it was 40.01 per cent. And so, the rise in the unemployment rate reflects a fall in employment during the month. This could be stressful.

There is also evidence of loss of employment in the steady fall in the employment rate during May 2021, which fell to 35.8 per cent as against 30-day moving average of 36.8 per cent in April 2021. This 100 basis point fall in the employment rate translates into a fall in employment of the order of 10 million. This would be much more than the 7.35 million fall in employment recorded in April 2021.

Employment in the country has been falling sharply since January 2021. It had fallen by about 10 million between January and April 2021. May 2021 could thus see over 10 million jobs lost because we still have a week to go before the month closes to an end.

Joblessness is pushing people in poverty in millions every month worsening the humanitarian crisis of hunger and malnutrition. When will the Government at the Centre swing into action with all the seriousness to tackle joblessness and consequent poverty?

(IPA Service)

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