Job market deteriorates even as unemployment rate falls to 6.4%: CMIE

India's overall unemployment rate declined to 6.4 per cent in the week ended September 20, the lowest level seen in a very long time, fresh data from industry think-tank Centre for Monitoring Indian Economy (CMIE) showed. However, this was not much to cheer as other weekly labour market metrics for the month of September so far indicated deterioration in conditions compared to the situation in August and earlier months since the recovery.

"The month of August itself had seen stagnation in the recovery process from the precipitous lockdown-induced fall of April. Deterioration from the August-stagnation implies a possible slipping away of the recovery process seen till recently. This is what emerges from the trend in the labour participation rate and the employment rate," the CMIE said.

As per CMIE, the average labour participation rate in the first three weeks of September was 40.7 per cent, while 30-day moving average was 40.3 per cent as of September 20 against 40.96 per cent in August.

The average labour participation rate (LPR) from June through mid-August was almost 40.9 per cent, which dropped to 40.45 per cent for the period mid-August through mid-September.

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"The LPR seems to have peaked a month ago in the week ended August 16. Since then, it has dropped to a significantly lower level," it said.

"A falling labour participation rate indicates that a smaller proportion of the working age population is employed or, is unemployed and is looking for employment. People who are employed or are unemployed but are actively looking for employment together make the labour force. A shrinking labour force compared to the total working age population is a sign of a deteriorating labour market. It indicates that people are so discouraged by the conditions that they prefer to sit out and not participate in the jobs market," said Mahesh Vyas, CEO, CMIE.

Besides, the decline in the labour participation rate, there was also drop in the employment rate, in terms of the proportion of the working age population that is employed. The employment rate stood in range of 39-40 per cent during 2019-20, while it averaged at 39.4 per cent the year. The rate fell to 27.2 per cent in June but recovered to 37.6 per cent in July. Reversing the trend, it fell to 37.5 per cent in August, while it was mixed in September.

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"The average employment rate during the first three weeks of the month, at 37.9 per cent is substantially higher than the rates seen recently. But, the slope is negative since the recovery is distinctly negative. After the April fall, the employment rate climbed up to a max of 38.4 per cent in the week ended June 21. Since then, it has slid down a zig-zag gradient," Vyas said.

As per CMIE data, the overall unemployment jumped to 8.35 per cent in August, as against 7.43 per cent in July, as the formal sector shied away from hiring amid COVID-19 pandemic and jobs in rural areas remained stagnant. The urban and rural unemployment rose to 9.83 per cent and 7.65 per cent, respectively.

By Chitranjan Kumar