The unemployment rate in urban areas has been consistently increasing for the last three months, from August to October, reflecting a growing mismatch between job creation and the labour force. Adverse impact of 50% additional US tariffs on labour-intensive manufacturing is also believed to have increased joblessness in urban areas.
Three-Month Uptick
According to the Periodic Labour Force Survey (PLFS) data, released by the Ministry of Statistics and Programme Implementation (MoSPI), the unemployment rate in urban areas increased from 6.7% in August to 7% in October. It was 6.8% in September.
The monthly PLFS bulletins by the MoSPI had shown a consistent increase in overall unemployment from 6.5% in April this year to 7.2% in July, before it moderated to 6.7% in August. However, the urban unemployment again started moving up in September and October. The situation is grimmer regarding urban female unemployment, which too has surged consistently over the past three months. It rose from 8.9% in August to 9.7% in October.
In rural areas, the rate of unemployment was, however, steady hovering around 4.3%-4.4% between August and October.
The MoSPI’s quarterly bulletin for July-September quarter also revealed a marginal increase in unemployment. The unemployment rate as per Current Weekly Status (CWS) approach ticked up slightly, from 6.1% to 6.2% for male and from 8.9% to 9.0% for females. The unemployment rate for people in the 15-to-29-year age group also showed a marginal uptick from 14.6% in the first quarter to 14.8% in the second quarter.
The CWS approach determines an individual’s activity status based on the last seven days preceding the survey date. According to the CWS approach, a person was considered as unemployed in a week if he/she did not work even for 1 hour on any day during the reference week but sought or was available for work at least for 1 hour on any day during the same week.
Underlying Causes
Experts attributed the rising trend to a combination of factors, including 50% US tariffs that came into effect from late August, skill gaps and lack of job opportunities amid expanding urbanization.
Atul Gupta, partner-labour and employment at Trilegal said that US tariffs and artificial intelligence (AI) could be possible factors behind the uptick in joblessness rate.
“Fluctuations in employment numbers are not uncommon, but in the present environment it could be for a few reasons. For instance, industries that are impacted by US tariffs could be taking a more cautious approach to their expansion and hiring plans till the dust settles and they can fully appreciate the impact of tariffs on their revenues,” Gupta said.
The US government imposed 50% extra tariffs on Indian goods over the MFN rates, linking half of the extra levy to India’s oil purchases from Russia. According to the government data, India’s exports dipped by 11.8% year-on-year in October this year.
Gupta stated that many industries are adapting to developments in AI, and that’s resulting in internal re-organization and restructuring which could create redundancies and/or impact hiring in some roles. “Employees are increasingly having to upskill or reskill to remain relevant in a fast-developing technology landscape,” he said.
Rahul Singh, associate professor at OP Jindal Global University referred to increase in urbanisation and said that the urban population is therefore growing faster than the number of jobs being created. He also highlighted absence of required skills as one of the reasons and advocated for raising the skills of the workforce as technology has taken a leap.