Covid effect: Weakened economy can’t produce jobs, unemployment rate at 19-week high

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May 11, 2021 3:45 AM

There has in fact been a steady increase in unemployment in recent months – the relevant rate rising to a four-month high of 7.97% in April compared with 6.5% in March, 6.89% in February and 6.52% in January.

XLRI professor and noted labour market expert KR Shyam Sundar said since around 21 states have resorted to restrictions, including stricter curfews, it was but natural that the urban unemployment rate breached the double-digit level.XLRI professor and noted labour market expert KR Shyam Sundar said since around 21 states have resorted to restrictions, including stricter curfews, it was but natural that the urban unemployment rate breached the double-digit level.

India’s unemployment rate touched a 19-week high of 8.67% in the week ended May 9, reflecting the economy’s increasing inability to generate jobs. The state of joblessness has been more acute in cities and towns – urban employment rose 164 basis points to a worrisome 11.72% in the latest week under review, compared with the previous week.

There has in fact been a steady increase in unemployment in recent months – the relevant rate rising to a four-month high of 7.97% in April compared with 6.5% in March, 6.89% in February and 6.52% in January.

According to the data released by the Centre for Monitoring Indian Economy (CMIE), the rural unemployment rate remained nearly static – it was at 7.29% for the week ended May 9 compared with 7.35% a week earlier and 8.58% in the week ended April 4.

CMIE MD and CEO Mahesh Vyas told FE, “Lockdown per se does not cause any increase in unemployment, it only stops people from going to work. Lockdown is causing shrinking of the economy, and as a result, employment opportunities reduce.” In the coming weeks, he said, movement of the unemployment rate will entirely depend upon the the extent of control of the Covid-19 pandemic. “If the virus comes under control, then situation can improve. But it continues to cause damage, then the economy will shrink and it will again have an adverse impact on unemployment rate,” Vyas said.

XLRI professor and noted labour market expert KR Shyam Sundar said since around 21 states have resorted to restrictions, including stricter curfews, it was but natural that the urban unemployment rate breached the double-digit level.

“However, given the reported reverse migration from states like Karnataka, Delhi and even Kerala, the urban unemployment rates could be much higher than what CMIE data could detect. In the backdrop of decline in off-take for MGNREGA jobs in Uttar Pradesh and given the fact the second wave of Covid is more present in rural areas compared to the first wave, the rural unemployment rates, too, might be higher than reported by CMIE,” Sundar said.

India’s unemployment rate reached its peak of 27.11% for the week ended May 3 last year; but it started coming down to stand at 4.66% for the week ended January 17, 2021. It started picking up since then, though not gradually.

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