COVID-19 shock: Unemployment rate in last two weeks crossed 23 per cent: CMIE

According to the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate has crossed 23 per cent in the last week on March and the first week of April, during the implementation of the nationwide lockdown that has shuttered businesses across the country.

According to the report, posted by CMIE CEO Mahesh Vyas, the unemployment rate in March as a whole was the lowest in 43 months (or since September 2016) at 8.7 per cent. In the last week, however, unemployment was at 23.4 per cent, while the employment rate dropped to just 27.7 per cent and the labour participation rate fell to 36 per cent.

The Labour Participation Rate (LPR) was 41.9 per cent in March, a figure CMIE says is the first time that the LPR has fallen below 42 per cent.  

The LPR was 42.6 per cent in February and 42.7 per cent in March 2019, according to the report.

The report attributes the drop to a significant fall in employment and a rise in unemployment in March.

“The components of this fall is telling of the times. The labour force consists of all employed persons and persons who are unemployed and are actively looking for jobs. What has happened between January and March is that the number of employed fell from 411 million to 396 million and the number of unemployed increased from 32 million to 38 million,” the report says.

The report notes that its sample size of 83,929 observations was smaller than the usual size of 117,000 participants, due to disruptions to survey operations from the lockdown since March 24. It adds the caveat that there could be variations in the magnitude of the change in employment.

“It is evident that there was a significant fall in employment and there is a simultaneous significant increase in unemployment in March 2020. And, this is what shows up in the rather sharp rise in the unemployment rate,” the report says.

They noted that the unemployment rate in the last week of March was 23.8 per cent, while the labour participation rate fell to 39 per cent and the employment rate was just 30 per cent. When data was added from the first week of April, the unemployment rate was 23.4 per cent, the LPR was 36 per cent and the employment rate was 27.7 per cent.

A post by CMIE on March 31, however, says that the unemployment rate is a tricky indicator during a nationwide lockdown, as people who are forced home due to the lockdown and who cannot work from home could be considered without employment.

According to CMIE in the post, “A person is classified as unemployed if such a person does not have any employment but is willing to be employed and is actively looking for employment.”

Since the lockdown has created a category of people who cannot look for work (even if they are eligible for work or are seeking work), the unemployment rate does not reflect the condition of daily wage workers.

“Most jobs are informal in the unorganised sectors. During times such as the current lockdown, they lose jobs and have no hope of finding any. So, they just leave the labour markets,” wrote Vyas, adding that economic distress caused by the lockdown would not show up in the unemployment rate but in “a fall in the labour participation rate and in the employment rate.”

CMIE reports have earlier highlighted the job crisis in India. In 2019, CMIE estimated that India had a shortage of 12 million jobs. Data from CMIE has been used in the absence of Periodic Labour Force Survey (PLFS) data, such as when an Azim Premji study showed that demonetisation had resulted in the loss of five million jobs.