Unemployment has emerged as a major worry for India as the unemployment rate has sharply and steadily risen since September to surpass 9% in December; this is the highest unemployment percentage witnessed in the country since the pandemic.
Substantiating this worrisome trend further is the data released, which clearly indicates that the formal sector job creation is witnessing a downward trend, thus indicating a slowing down in the economic momentum in the present.
No Jobs and No Jobs!
Hundreds in the country have had to experience the unfortunate situation of massive layoffs that almost all major startups and other companies have initiated.
What is worse is that while job losses have been the current norm and as seat belts have been tightened in the advent of economic recession, labour markets experts have pointed out that even as more people are entering the workforce, unfortunately, the availability of jobs has become a big question mark.
Hence, for December, the unemployment rate has crossed over 9%; wherein the number of persons not employed but willing to work and actively searching for a job as a fraction of the labour force is defined as the unemployment rate.
The Double Whammy – No Jobs And High Inflation
While Job creation has taken a slow pace, inflation for industrial workers has continued its steadfast pace and thus indicating a potential worsening of the labour situation.
Rural wages are already showing signs of depression, and mixed trends are seen in formal-sector job creation. These have significantly raised concerns if the spurt in private consumption recorded in the second quarter of the fiscal year will continue in the coming months.
The all-India unemployment rate shot up to 8% in November, its highest level since August when it had touched 8.28%. It stood at 7.77% in October.
Urban unemployment shot up in November to 8.96%,
Rural unemployment dipped to 7.55%.
What is the accurate picture?
The overall picture may look healthy monthly due to post-festive recovery.
But if we were to do a deeper analysis at the sector level, it reveals mixed trends compared to the better times of the first half of this year, which witnessed high growth in hiring activity.
Further overall hirings in sectors including IT, education and retail sector have significantly declined.
What are the Concerns?
As captured by the Labour Bureau :
- Retail inflation for industrial workers remained above 6% in October, although it eased marginally from September.
- Consumer price inflation for industrial workers for October 2022 stood at 6.08%, compared to 6.49% in September and 4.52% during the corresponding month a year before.
- Food inflation remained high at 6.52% in October, although it was marginally lower from 7.76% in September. Food inflation was at 2.2% in October 2021.
Analysts have warned that lower formal sector employment and subdued rural wages could be a dampener on consumption.
Improving contact-intensive services amid stable urban consumption demand could continue at a slower pace for some more time.
Formal sector employment growth is reducing, indicated by the sequential fall in new EPFO payrolls and the Naukri Job index.
Additionally, subdued real rural wage growth may further impact rural consumption.
Crisil also noted that while domestic demand has stayed relatively resilient so far, it would be tested next year by weakening industrial activity.
Increasing transmission of interest rate hikes to consumers will also be a pressure point, it further said, adding that rural income prospects remain dependent on the vagaries of the weather.
Private final consumption expenditure positively contributed to second-quarter GDP growth and increased by 9.7% in the quarter compared with 25.9% in the previous quarter.
Conclusion: We may be in for one of the most tumultuous times – economic slowdown, volatile markets, rising inflation, massive layoffs, no or limited job creation both in the formal and rural, and the possibility of Covid -19 making a comeback.
It will take great insight, correct policies, and timely intervention on the part of the state and central governments to pull us through these challenging times.