The sudden rise in the unemployment rate was due to a significant number of workers returning to the labour market in the search of jobs.
Unemployment resurged in December to the highest since the unlock phase began in June since migrant workers returned to the job market to find work. It rebounded sharply to 9.1 per cent in December 2020, after having moderated from the record high of 23.52 per cent in April 2020. Unemployment was recorded at 6.5 per cent in the previous month of November, according to the Centre for Monitoring Indian Economy (CMIE).
The sudden rise in the unemployment rate was due to a significant number of workers returning to the labour market in the search of jobs. The labour force increased from an estimated 42.1 crore in November to 42.7 crore in December. But, labour markets were supposedly not ready for the additional 60 lakh surge in labour, which left them largely unemployed.
Rise of unemployment (Source: CMIE)
- November 2020 (monthly): 6.5 per cent
- December 2020 (monthly): 9.1 per cent
- Week to 6 December: 8.4 per cent
- Week to 13 December: 9.9 per cent
- Week to 20 December: 10.1 per cent
- Week to 27 December: 9.5 per cent .
“The main source of the problem that led to the rise in unemployment in December was the failure of the farm sector to absorb the influx of labour,” CMIE added. Even as farming is the last resort of many workers who are rendered jobless, December is not the month in which it can generally absorb labour.
What acts as a double-edged sword is the fact that the rise in employment is worse at a time when the prices of household items are rising at a faster rate. Inflation has lingered around 7 per cent in recent months. Also, the steep increase in the unemployment figures raises a question on the recovery process. Meanwhile, the count of the unemployed mounted to 3.87 crore in December 2020, compared to 2.74 crore in November. This huge rise in the joblessness rate places the unemployed higher than it was before the lockdown.