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Employment rate falls to 37.3% in October


NEW DELHI: October belied hopes of a sustained increase in employment. It had increased by a handsome 8.5 million in September and by the middle of October it seemed likely that October would see a further increase.
There were several reasons to be hopeful. The September growth in employment was not in agriculture, which is often disguised unemployment but it was in construction and food products manufacturing, which seemed more sustainable.
The growth was spread across rural and urban India. In mid-October, the employment rate had risen to 38.5 per cent compared to 37.9 per cent in September. There were good reasons to believe that employment would continue to expand in October.
But, that rise in the employment rate in mid-October turned out to be short-lived. The rate came down to 37.6 per cent and 37.1 per cent in subsequent weeks. As a result, October ended with an employment rate of 37.3 per cent, which turned out to be lower compared to 37.9 per cent in September. The fall in the employment rate in the midst of the festival season is surprising and also disappointing.
Equally surprising is the fall in the labour participation rate (LPR) in the season. The LPR fell from 40.7 per cent in September to 40.4 per cent in October. Worse still, in spite of the fall in the LPR, the unemployment rate rose from 6.9 per cent in September to 7.8 per cent in October. The unemployment rate has failed to remain below 7 per cent for more than a month and the average rate is close to 7.5 per cent.
The labour force shrunk by 1.75 million and employment fell by 5.5 million in October compared to the levels of September. Total employment was 401 million in October 2021. Ranks of the unemployed increased by 3.7 million from 30 million in September to 33.7 million in October. Besides, the count of the passively unemployed (those who were willing to work but were not actively looking for work) also increased by 1.25 million, from 14.9 million to 16.2 million.
Rural India could not sustain the 280 million people it employed in September. This was the highest absorption of labour by rural India since January 2020. In October 2021, rural India shed 6.2 million jobs to fall back to 274.5 million, which was the average employment in rural India during July and August 2021. The disproportionate increase in employment seen in rural India in September seems to be corrected in October.
Urban India performed better during October. It added 0.7 million jobs. It provides employment to 126.2 million. The urban employment rate improved from 34.6 per cent in September to 34.7 per cent in October. The unemployment rate declined from 8.6 per cent to 7.4 per cent. The only poor performer in urban India was the labour participation rate that fell from 37.9 per cent in September to 37.5 per cent in October.
All the major occupation groups in urban India- business persons, salaried employees and daily wage workers- recorded small increases in employment in October.

In rural India, the biggest hit to employment was among daily wage workers. Employment among daily wage labourers in India fell by a massive 19.6 million in October. This was the single largest casualty in the labour markets in October 2021. All of this was in rural India.
There was an oddly big increase in the number of persons reporting as business persons. Such persons increased from 74.4 million in September to 79.7 million in October, an increase of 5.3 million. The number of business persons is now close to where it was just before the Covid-19 pandemic hit India.
The rise in business persons is odd because these are not the best of times to be an entrepreneur. Besides, in October, the rise in business persons is not accompanied by any increase in salaried employees or even daily wage labourers. The increase in employment as business persons is therefore more likely the result of a saturation of employment opportunities and an increase in self-employment.
The saturation of employment opportunities is also reflected in an increase in employment among farmers. Being a farmer is also a form self-employment. And, self-employment is often disguised unemployment.
Employment increased in retail trade in October. This is possibly an outcome of the increased trade during festival times. Retail trade absorbed an additional 3.4 million in October. Employment reached 63.5 million in this industry. This is close to the 64.4 million peak labour absorption by this industry achieved in August 2021.
The second biggest absorber of additional labour in October was personal non-professional services. Employment here increased by 1.8 million from 28.6 million in September to 30.3 million in October 2021.
Food industries that absorbed 2.5 million persons in September shed 2.2 million in October. Construction that absorbed 5.6 million persons shed a much larger 7.7 million in October. These quick reversals of gains made in September within a month in October are disappointing. They point to the fragility of the recovery process.
Although the number of people claiming to be farmers increased by 9 million in October, the agricultural sector shed 2.4 million jobs. Implicitly, the hit was absorbed by agricultural labourers. We see this in the fall in daily wage labourers, which includes agricultural labourers.
(The author is and economist and chief executive officer at Centre for Monitoring Indian Economy.)

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