Unemployment rate rose marginally to 8.6% in the week ended June 28 from 8.5% a week earlier. The rate reached a peak of 27.1% in the first week of May due to the lockdown.
“The labour participation rate fell from 42% in the previous week to 41.4% in the latest week (ending June 28) and the employment rate also fell from 38.4% to 37.8%.
In spite of this small deterioration of labour conditions in the latest week compared to the preceding week, the data indicate a dramatic improvement over the labour conditions in April and May. The unemployment rate has declined and simultaneously, the participation rate has recovered to close-to pre-lockdown period,” Centre for Monitoring Indian Economy (CMIE) said in its latest report.
The unemployment rate spiked from 8.75% in March to 23.5% in April and May. It had peaked at 27.1% in the week ended May 3. It began to fall thereafter — initially hesitatingly and then steeply in June. The rate had fallen to 20% in the last week of May.
The unemployment rate first dropped to 17.5% in the first week of June and then it fell further to 11.6% in the second week of the month and now, at the end of the fourth week of the month, it stood at 8.6%. This signals a rather smart revival of the economic activities, corroborated by certain other data points including exports, which touched $4.94 billion in the first week of June, against $5.03 billion a year before, industrial power consumption and highway toll collections.
CMIE said the improvement in rural India employment could be explained by the rise on Mahatma Gandhi National Rural Employment Guarantee Act (MG-NREGA) spending and kharif sowing. Person days of jobs provided under MGNREGA had reached an all-time high of 568 million in May 2020, and increase in MGNREGA spending continued in June. Kharif sowing till June 26 was more than twice it was a year ago.
“There is no overlap between MGNREGA work and sowing work. The two together, therefore, have evidently powered the rural employment surge in June. This could have also absorbed a part of urban labour as well. The high demand for labour in rural India because of aggressive sowing and the rising wages in rural India are drawing urban labour into the rural India. But, this could have absorbed only a small proportion of the total urban labour,” CMIE said.
CMIE had in its earlier report said though the urban unemployment has fallen sharply, it is still distinctly higher than the pre-lockdown levels at 11.2% in the week ended June 12. The urban unemployment spiked to an average of 25.83% during the peak unemployment period of April and May.
“Urban labour has reasons to be desperate for jobs. It cannot afford to stay unemployed for so long. The cost of living and poverty rates in urban India are higher than in rural India. This is what drove the migrants out. This is what compels the rest to drop wages to find odd jobs to survive. Usually, urban wage rates are 50% higher than rural wage rates. But, this could be narrowing very rapidly now,” CMIE said.