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HomeEconomyUnemployment rate falls in September, shows CMIE data, but it's still too...

Unemployment rate falls in September, shows CMIE data, but it’s still too early to celebrate

The slow pace of economic activity in urban areas has seen a decline in the urban labour force or the number of people actively looking for jobs, CMIE data shows.

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New Delhi: Employment levels rose and unemployment rate declined to 6.67 per cent in September as compared to 8.35 per cent in August, according to the Centre for Monitoring Indian Economy (CMIE).

However, the data on the low unemployment rate gives little reason to celebrate. This is because urban India is still struggling to create jobs as the pace of pick-up in economic activity remains slow. And even though there is a creation of jobs in rural India, they are low quality and for the less-educated.

The CMIE data shows there has been a sharp fall in the urban labour force in September, when compared to both year-ago period as well as the previous month. This means people who were earlier looking for jobs have dropped out of the labour market.


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Shortage of labour in urban areas

The labour force shrank by 46 lakh in September in towns and cities, the sharpest fall in the urban labour force this year, with an exception in April 2020 when the country was under a nationwide lockdown.

K.R. Shyam Sundar, Professor in Human Resource Management at XLRI Jamshedpur, pointed out that some sectors have not resumed operations or are functioning at much lower capacity due to shortage of labour supply in urban areas. The spread of the virus and the surrounding uncertainty about restrictions is not helping either, he said.

“Partial liberalisation (opening up) does not produce desired employment outcomes. Hospitality sector has not resumed activity to even half of its pre-Covid levels. Even after the unlock guidelines, they are not resuming activities because of the fall in labour supply. Spread of the pandemic means that many restrictions on activity continue to be in place,” he told ThePrint.

“Labour market is crawling to the state of normalcy but it will be attained only in the first quarter 2021 (January to March),” he added.

CMIE data showed that both employment and unemployment fell by 23 lakh each in urban areas in September.

Sundar added that the trend across states will be different due to reverse migration of workers.


Also read: India’s economic recovery to be gradual, says RBI Governor Shaktikanta Das


‘Shrinking of labour force sign of discouraged workers’

CMIE data shows that the overall labour force shrunk by 22 lakh to 42.6 crore workers in September as compared to August, with the rural labour force increasing by around 23 lakh.

“A large shrinking of the labour force is a sign of discouraged workers,” said Mahesh Vyas, MD and CEO of CMIE in a note dated 2 October published on the website.

“In sharp contrast to the apparent increased economic activities in the hinterlands, urban India saw a shrinking of its labour force and employment – evidence of an apparent shrinking of economic activities,” Vyas said.

In rural India, employment increased by 74 lakh and unemployment came down by 50 lakh in September. However, the quality of the rural jobs leaves much to be desired.

“The increase in rural employment is concentrated in those with an education level of between sixth and ninth grade. While on a net basis, a total of 7.4 million additional rural jobs were added in September, 8.1 million job additions were among those with less than high school education in rural India. These are not the best jobs,” Vyas said.


Also read: After HDFC & ICICI banks, Axis to now give salary hikes while others cut jobs and pay


 

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