India’s headline urban unemployment rate reached its lowest-ever level in the quarter ending September 2022, according to the quarterly bulletin of the Periodic Labour Force Survey (PLFS) released by the National Statistical Office (NSO) on November 24. However, the bulletin’s data also suggests that at least some of the improvement could be because of an increase in poor-quality jobs, a trend seen regularly since the Covid-19 pandemic. Because quarterly PLFS reports do not cover rural labour markets, they only give a partial picture of the employment scenario in the economy.
India’s urban unemployment rate was 7.2% in the quarter ending September 2022, 40 basis points (it is one-hundredth of a percentage point) lower than the previous low of 7.6% in April-June 2022. The improvement was even bigger if one just considers unemployment rates for the September quarter. The lowest unemployment level seen in the September quarter earlier was 8.4% in July-September 2019. Comparing rates of the same quarter is important because unemployment rates also change due to the seasonal nature of some jobs.
An improvement in the unemployment rate alone is, however, not a sufficient indicator of the state of the job market. The rate can also improve when jobs are stagnant in the economy but fewer people are seeking them. This is not the reason for the improvement seen in the latest numbers. The Labour Force Participation Rate (LFPR) – or the share of people working or seeking jobs – was 37.6% in July-September 2022, the highest for the quarter since April-June 2018, the earliest period for which data from PLFS urban bulletins are available.
To be sure, a large share of the population seeking and getting jobs can also signal job-related distress in the economy. A large number of people can also seek work because those working are not getting paid enough. Some of the data in the urban bulletin suggest this to be the case in July-September 2022. The proportion of regular wage or salaried workers was 48.7% in the quarter, for example, the same as the share in the same quarter last year, which is the lowest level for the quarter. The share of self-employed was 39.7% - the highest for the quarter – and the share of casual workers was 11.6%, higher only than the 11.4% figure seen in July-September 2020.
{{/usCountry}}To be sure, a large share of the population seeking and getting jobs can also signal job-related distress in the economy. A large number of people can also seek work because those working are not getting paid enough. Some of the data in the urban bulletin suggest this to be the case in July-September 2022. The proportion of regular wage or salaried workers was 48.7% in the quarter, for example, the same as the share in the same quarter last year, which is the lowest level for the quarter. The share of self-employed was 39.7% - the highest for the quarter – and the share of casual workers was 11.6%, higher only than the 11.4% figure seen in July-September 2020.
{{/usCountry}}Not all of the data signals employment due to distress, however. The share of agricultural workers declined from to 5.7% from 5.9% in the same quarter last year, for example.
The share of secondary sector workers (this includes industrial sectors like manufacturing) was 33.4%, up from 33.3% last in the same quarter last year. Services workers remained the same as last year at 60.9%. Because both regular and agricultural jobs declined, it is not possible to say with certainty why the unemployment rate has improved to its historically best level. It will be possible to answer that question with more clarity when data on wages becomes available when the unit-level data of the PLFS is published.