This is largely due to a near 400 bps fall in the rural unemployment rate to 9.58% for the week under review from 13.51% for the week ended May 23.
Unemployment in the urban areas stood at a worrisome 17.88% for the week ended May 30. The rate has risen for the seventh straight week and 47 basis points (bps) over the previous week. While worse is yet to come, the jury is still out on whether the rate will rise to the highest level ever of 27.1% seen in the aftermath of last year’s lockdown.
According to data compiled by the Centre for Monitoring Indian Economy (CMIE), the overall unemployment rate, however, fell to 12.15% for the week ended May 30 as against 14.73% in the preceding week. This is largely due to a near 400 bps fall in the rural unemployment rate to 9.58% for the week under review from 13.51% for the week ended May 23.
The urban unemployment rate has soared nearly 1.5 times since the second wave of the pandemic started ravaging the country in April. As for the week ended April 4, the overall unemployment rate was 8.16%, the urban unemployment rate was 7.21% and the rural unemployment rate was 8.58%.
CMIE’s MD & CEO Mahesh Vyas said the decline in the rural unemployment rate was because the rural labour force participation rate (LFPR) had fallen. “Fewer people are looking for jobs there (in rural areas). But, the pressure on jobs continues in urban India,” he said.
Labour market expert and XLRI professor K R Shyam Sundar said more than the unemployment, decline in LFPR should worry because people are withdrawing from the labour market rather than seeking jobs which may be attributed to fear of getting infected. Thus, tackling Covid-19 could improve labour market performance along with sectoral revival policies, he said.
Labour force participation rate is an age-specific proportion between persons either working or actively seeking work and the total population in the working-age group, usually 15 years and above. The unemployment rate is a ratio between persons who are not currently in a job but are actively searching for one and the total labour force.
Ashwini Deshpande, Director, Centre for Economic Data and Analysis (CEDA) at Ashoka University said the rise in urban unemployment rate must be because of the lockdowns that resulted in stopping all factories and construction activity.
“For instance, in Delhi, the lockdown would complete seven weeks soon. All the daily wagers would be out of work, several of the factory and construction workers (those who are in the city) might report themselves as unemployed. Plus, service providers like plumbers, electricians, or workers in sectors closed for a prolonged period like beauty parlour, malls, cinema theatres, shop helpers etc,” said Deshpande.