Estimated unemployment rate shot up to a 27-month high of 7.38 per cent in December 2018 and the numbers of those employed fell by 1.09 crore over the last 12 months from 40.78 crore employed in December 2017 to 39.69 crore in December 2018.
These are the estimates provided by CMIE database on “Unemployment Rate in India” that is based on the panel size of over 1,58,000 households. The CMIE data, however, also shows that alongside the rise in unemployment, there has been a dip in the labour participation rate.
The unemployment rate in December 2018 shot up to 7.38 per cent from 6.62 per cent in November 2018 and 4.78 per cent in December 2017. This is also the highest unemployment rate since September 2016 when it stood at a high of 8.46 per cent.
A closer look at the numbers show that a large part of the drop in employment over the last 12-months is on account of job losses in rural areas. Of the total drop of 1.09 crore jobs in calendar 2018, 91.4 lakh or over 83 per cent of the jobs were lost in the rural areas, shows the database.
The number of those employed in rural areas dropped from 26.94 crore in December 2017 to 26.03 crore in December 2018. The remaining 17.9 lakh jobs were lost in the urban areas as the overall numbers of employed fell from 13.84 crore to 13.66 crore.
However, in line with a dip in the unemployment rate, the CMIE data shows that there has been a dip in the estimated labour participation rate — proportion of working-age people (which is people of 15 years or more) who are willing to work and are either actually working or are actively looking for work.
According to the CMIE data, the estimated labour participation rate came down to 42.47 in December 2018 from 43.57 in December 2017. It however, stood at 45.15 in December 2016 and at 47.84 in September 2017.
In an article in October 2018, Mahesh Vyas, MD and CEO of CMIE wrote, “In my opinion, the LPR is more important than the unemployment rate because it tells us how many people are willing to work.”
He further said that while a high LPR directly contributes to growth, if a very small proportion of people are willing to work then a low unemployment rate does not mean much. Data shows that while the trend in urban and rural areas have been broadly the same in calendar 2018, it was contrasting in calendar 2017.
While the urban regions witnessed an overall increase in the number of employed by 35.5 lakh, the rural areas witnessed over 10 lakh job losses in 2017 too.
In 2018, while the pace of job losses only gained momentum in rural areas, the urban parts too witnessed job losses.