Unemployment rate fell to 6.7% in March but urban employment shrank: CMIE

Unemployment rate declined in March this year to 6.7% after remaining over 7% in the three preceding years, according to Centre for Monitoring Indian Economy (CMIE). The drop is significant because unemployment growth had steadily risen in December, January and February. From 6.7% in November, the rate of unemployment grew to 7% in December, followed by 7.1% in January and 7.2% in February. While this is good news, there is cause for caution too. The decline in the unemployment rate comes in the backdrop of a fall in labour participation.

The rate of labour participation fell from 42.7% in February to 42.6% in March. Labour participation rate seems unable to move past 43%, a margin that has been breached only thrice in the past year. However, the rate had swiftly reverted to the lower levels. Even so, it does not fall much further. It fell below 42.5% only once in the past one year - in the month of October, the report mentions.

This is the second consecutive month to have witnessed a fall in labour force. The labour force shrunk from 435 million in January to 431 million in February. It has shrunk further to 430 million in March.

While the labour force shrunk by a million, the number of employed rose by a million - from 400 million to 401 million - implying that the labour force shrunk because of a fall in the number of people looking actively for jobs, the CMIE analysis said. The fall in the number of unemployed from 31 million to 29 million, was entirely in rural India, the report mentions.

This could be the result of the activities around rabi crop. Sowing of rabi ends in February but harvest does not begin before April, leaving the month of March to see high demand for labour. Employment in rural India shot up to 275 million in March from a low of 271 million in February, as mentioned in the CMIE report. Employment in rural India has been fluctuating between 270 and 276 million since November last year.

However, another dampener is that employment fell sharply in urban India in the month of March. From 129 million in February urban employment fell to 127 million in March. This is the lowest employment seen in urban India in past two years. The fall was significant enough to drag urban India's labour participation to its lowest since January 2016 - to 40.5% in March.  

Urban employment rate was worse off at 37.3%, which is 50 basis points lower than the lowest urban employment rate of 37.8% so far, last seen in November 2018. Urban India saw a mix of historically low labour participation, fall in employment rate and high unemployment rate of 7.9%, the CMIE report mentions.

The pick-up in employment in rural India improved its rate from 40.4% in February to 40.9% in March, taking the overall employment rate in India to 39.7%.

Another worrisome trend is the lack of growth in employment among men. In March when a total of one million jobs were added, one million men lost their jobs. This fall is mostly centred in urban areas. On the other hand, there was an increase of three million jobs in women, which is mostly centred in rural India. Urban women jobs also declined in March 2019. However, the fall in female employment seems to have stopped since end of 2018.   

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