Employment contracts by 2.4% in November: CMIE

Employment in India contracted for the second consecutive month in November, raising questions on the recent optimism around recovery in job markets in the aftermath of COVID-19 pandemic. In November, the count of the employed fell by 0.9 per cent or 3.5 million, as against 0.1 per cent drop in employment recorded in October, as per latest data released by the Centre for Monitoring Indian Economy (CMIE). The employment in November 2020 was 2.4 per cent lower than it was a year ago.  

As per private think-tank CMIE, employment has not reached pre-COVID levels by any measure as it has remained significantly lower in each of the months since March 2020 as compared to the levels in the corresponding months of 2019.

"The recovery in employment, from the steep fall during the April lockdown was smart initially but, it slowed down well before the recovery was completed. In fact, the recovery quickly and progressively slowed down in July, August and September. Then, it reversed in October and November," said Mahesh Vyas, MD and CEO of CMIE, in his latest post.

Vyas said that it seems like that the recovery phase is over and a decline is setting in again, which could be a reflection of the economy as a whole.  

"This is so because unlike much of the official data that is available so far which is almost entirely based on the organised sector, the employment data collected by CMIE's Consumer Pyramids Household Survey is far more comprehensive as it covers the organised and unorganised sectors since it is based on all kinds of households," he added.

The count of the unemployed had spiked to 87 million in April and May 2020. However, it fell to 35.7 million by August 2020, in line with the smart recovery seen in employment. It further declined to 28.4 million in September and 27.4 million in November 2020 even when employment began stagnating and then declining.   

"This is an anomalous behaviour of labour where, even if employment does not rise, the count of the unemployed keeps declining," he said.

According to CMIE, labour is getting discouraged by the lack of jobs on offer and is exiting the active labour markets where the unemployed seek work. "And so, in spite of an incomplete recovery, India faces falling employment and falling unemployment. The sustained loss of jobs and also the apparent falling wage rates or income levels is discouraging workers from remaining the labour markets," it said.

Meanwhile, the count of inactively unemployed (people not interested in working) stood at 22.5 million in November 2020, almost twice the average 11.6 million who were similarly unemployed in 2019-20. During the month, the labour force (the sum of employed and the unemployed who are actively looking for work) has shrunk by about 16 million but, the greater labour force (which includes the labour force and the unemployed who are willing to work but are not actively looking for work) has not shrunk as much, it said.  

In November 2020, the labour force was estimated at 421 million compared to 437 million in 2019-20, which implies 3.6 per cent shrinkage. The greater labour force in November 2020 was 443.5 million compared to 448.4 million in 2019-20, declining by 4.9 million or 1.1 per cent.

"But, the shrinking of the greater labour force indicates that around five million potential workers have left the labour force entirely. This is worrying," says CMIE.

The CMIE said that the last few weeks have shown some hopes of this declining trend bottoming out in December. The labour force participation rate and the employment rate have risen in two consecutive weeks - of November 29 and December 6, 2020. 

Also Read: Higher employment rate a drag on India's labour productivity, explains CMIE

Also Read: India's unemployment rate improves to 6.51%, lowest since September 2018