Joblessness eases to 3-month low in December, active workforce up

Joblessness eases to 3-month low in December, active workforce up

India’s overall unemployment rate fell to a three-month low of 8.65% in December from 8.88% the previous month, due to sharp drop in rural joblessness, data from the Centre for Monitoring Indian Economy (CMIE) showed.

During December, the rural unemployment rate fell to 7.97% from 8.68% in November, while the urban unemployment rate increased to a four-month high of 10.08% from 9.31%.

The labour participation rate (LPR), an estimate of active workforce in the economy, stood at a 45-month high of 41.88% in December from 40.92% in November. This was largely a result of the record-high (highest since January 2019) rural LPR of 43.12%. The urban LPR stood at 39.48%, the highest in four months.

Also, during the month, the female LPR was at a record-high level of 12.08%, while the LPR of males stood at 67.86% compared to 67.45% in November and 68.10% in October.

However, on a quarterly basis, the unemployment rate in October-December stood at a 10-quarter high of 9.05% as against 7.85% in July-September and 8.19% in October-December 2022. Urban unemployment rate in October-December was at 9.35%, while the rural was at 8.90%. For the past few months, urban joblessness has worsened, and this is reflected in other proxy indicators also.

“For urban areas, EPFO payroll is showing moderation over the last couple of months, indicating slowdown in formal sector employment creation. Listed company labour cost growth which is a proxy for urban wage growth has slowed in Q2FY24,” said Gaura Sen Gupta, economist, IDFC FIRST Bank.

In October, the net additions in the EPFO (employee provident fund organisation) were 1.53 million, the lowest in seven months.

However, data released by the Period Labour Force Survey doesn’t support the joblessness data released by CMIE. As per PLFS, urban unemployment in the first two quarters of FY24 was the lowest since the start of the survey in FY18, at 6.6%.During the pre-pandemic period, urban unemployment rate ranged between 7.8-9.7%.

Economists have questioned the credibility of the CMIE data owing to high volatility in monthly numbers. But the CMIE data still holds significance, as it’s the only data available which gives the immediate picture of the joblessness condition in the country.

When it comes to the PLFS, the respondents are asked about their job activity in the past seven days, which reduces the margin of error. However, for the CMIE data, the reference period is just one day. Thus, if an individual is not doing any activity on the day of the survey or a day prior, he/she is termed unemployed.