India’s unemployment rate for persons above 15 years of age in urban areas fell for the fifth straight quarter to 7.2% in July-September, as per the 16th Periodic Labour Force Survey (PLFS). But other indicators show a mixed picture. What is happening on job creation? Surabhi explains the different employment indicators:
Need for employment data
The availability of data on the labour force at regular intervals is crucial to ensure economic policies have the desired results. Employment generation is a priority on the agenda of the government. As per the ILO, indicators that measure the ability of an economy to generate sufficient employment can provide insights into its overall performance.
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These indicators include unemployment rates, employment-to-population ratios, labour force participation rates, and the employment intensity of growth or elasticity of employment vis-a-vis output. However, India, unlike many developed economies, does not have any official high frequency indicators on jobs that come out on a weekly or monthly basis.
Employment generation indicators
Originally, the NSSO conducted quinquennial employment surveys. The PLFS is now conducted by the MoSPI to estimate the key employment indicators at an interval of three months for urban areas only, in the Current Weekly Status. An annual report is also released. The Labour Bureau conducts quarterly surveys in nine sectors of the non-farm economy. Of late, the EPFO has begun sharing monthly data on new subscribers , a proxy for the number of formal sector jobs created.
A more frequent barometer is CMIE’s Unemployment Rate, computed on a monthly as well as a daily basis (30-day moving average). It provides data for both rural and urban areas. Other private agencies such as PMI and recruitment firms also give such data through their surveys, using different methodologies.
The best and most comprehensive indicator
This has been quite an issue of debate within the government and in academia. Generally, the government prefers to use its own official data such as the PLFS, Labour Bureau surveys and the EPFO payroll data to talk about job creation, though there have been recalls too.
Many economists feel that the EPFO’s payroll data and the PLFS data have their own set of limitations, including volatility and inadequacy of coverage. As a result, many economists, researchers as well as media organisations also refer to the CMIE unemployment rate; this is seen as more up to date and is out on a monthly basis. It also gives a picture of what is happening in the rural economy, as employment data is often not available for this segment. The monthly bulletin of the RBI also refers to the CMIE data in its article on the State of the Economy.
What do current data say about declining unemployment?
The data on unemployment and employment continues to give a mixed picture, and varies depending on the indicator considered. As a thumb rule, at a time when the economy has been on the recovery path post the Covid-19 pandemic, more jobs are likely to have been created. The finance ministry, in its Monthly Economic Report, has said recovery in economic activities across sectors has improved the overall employment situation, citing data from the PLFS, EPFO payroll data, Naukri Job Speak Index, and PMI, as well as the demand for work under the MGNREGS.
However, the all-India unemployment rate of the CMIE is up, at 7.77% in October, from 6.43% in September. On the whole, there seems to have been a recovery, but perhaps a patchy one, with job creation in the formal or organised sector post the Covid-19 pandemic. The situation in the rural areas, however, is not clear. Also, these surveys don’t capture the picture in the gig economy where jobs are created but the nature of employment is not always the same as formal employment.