The unemployment rate in the country continues to remain high despite the sharp rebound in labour participation rate, said Mumbai-based think tank Centre for Monitoring Indian Economy (CMIE).
CMIE said the unemployment rate fell “very sharply” from 23.5 per cent in May 2020 to 11 per cent in June. However, the think tank’s Managing Director and CEO Mahesh Vyas said the 11 per cent unemployment rate in June is “still quite high” compared to the less than than 8 per cent rate before the lockdown.
“The unemployment rate had been rising steadily since 2017-18 when it had averaged 4.6 per cent. In 2018-19 it rose to 6.3 per cent then in 2019-20 further to 7.6 per cent. Compared to these rates and also the trend seen in them, the unemployment rate in June 2020 at 11 per cent is still quite high,” Vyas wrote in a July 7 CMIE release.
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“Further, the declining trend in the unemployment rate seen in June seems to be flattening out,” he added.
Unemployment rate stalls
CMIE noted that the fall began in the week ended May 31 when the rate fell to 20.2 per cent. There was a steep fall in the three weeks that followed. However, the think tank said the unemployment rate stopped falling any further in the last week of June.
In fact, the unemployment rate rose by 0.1 per cent in the week ended June 28 and rose again in the following week ended July 5 by 0.3 per cent.
“The data so far, therefore, seems to suggest that the worst is over and we are likely to settle at an unemployment rate which would be only slightly higher than the rates witnessed before the lockdown,” Vyas wrote.
At the same time, Vyas said that it is equally likely that the period of rapid recovery in the unemployment rate, seen in June, is also over.
It may be noted that the sharp recovery in the unemployment rate was related largely to the increase in labour participation rate (LPR) after the stringent lockdown.
“The LPR had fallen from an average of well over 42.5 per cent in the second half of 2019-20 to 35.6 per cent in April 2020, the first month of the lockdown. Suddenly, in just one month, the labour force had shrunk by 69 million, from an average of 438 million in the second half of 2019-20 to 369 million in April 2020,” Vyas said.
However, the LPR jumped in June to 40.3 per cent but it has still not retained its 42.5 per cent before the lockdown.
CMIE, however, explained that there could be further improvement in the unemployment rate in July as more jobs will be added. “But, to ensure that the month does end up with net addition to jobs, the employment rate should not continue slipping as it has been in the past two weeks,” Vyas said.
India’s estimated employment in June 2020 was at 374 million, almost 30 million short of the average 404 million employment in 2019-20. While the gap may have shrunk a little more in the first week of July, there is growing evidence to support that fact that pace of recovery is slowing down.
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