Employment gains

India’s employment data for May 2022 shows stability at the macro level and simultaneously a positive movement of labour at the sectoral level. The macro-level stability is evident in the most important labour market indicator — the employment rate. It increased marginally from 37.05 per cent in April to 37.07 per cent in May 2022. This improvement was the result of a small fall in the labour participation rate but a larger fall in the unemployment rate. What this means is that while the number of people seeking employment declined marginally, a smaller proportion of those who were seeking employment were left unemployed. The labour participation rate fell from 40.19 per cent in April to 39.91 per cent in May. This is not a good sign. But, what’s good is that while 7.83 per cent of those who were seeking employment in April were left unemployed, only 7.12 per cent were left unemployed in May.

At the macro level, therefore, the difference between the labour conditions in May 2022 did not vary much from those in April 2022. Data with precision at the second level after the decimal had to be used in the above paragraph to highlight the small differences.

But, there were significant shifts in labour markets between April and May 2022. First, the small increase in the employment rate described above translates into a one million increase in employment. Employment increased from 402.9 million in April to 404 million in May. This is the second consecutive month of an increase in employment. The increase in April was much bigger at nearly 7 million.
 

What is interesting is the big shift in employment from agriculture to industry and services in the last two months. In April, employment in agriculture declined by 5.2 million. But, industry added 5.5 million and services another 6.7 million. As a result, net employment increased by a handsome 7 million in April. In May, agriculture shed a much larger 9.6 million jobs. But, industry absorbed 10 million and services another half a million. Net employment, therefore, increased again — this time by a relatively modest one million.

Cumulatively, over April and May, agriculture shed 14.7 million jobs. Industry provided 15.6 million jobs and services provided another 7.2 million. As a result, 8 million net additional jobs were created in the past two months.

Arguably, industry and services harness labour more productively than agriculture and, therefore, there is reason to cheer this recent transition. Further, within industry, the absorption of additional labour is slightly in favour of the manufacturing industries compared to the construction sector. In 2021-22, manufacturing accounted for 32 per cent of all employment in industry and construction accounted for another 65 per cent with the rest absorbed by utilities. Of the incremental jobs in industry during April and May, 34 per cent went to manufacturing and 65 per cent to construction.

Manufacturing added 5.4 million jobs during April and May. By May, total employment in manufacturing reached 34 million. This is the highest since the pandemic but it is still lower than the over 40-million level of October-December 2019.

Within manufacturing, the biggest gainer of employment is the metals industry. This industry has seen a rapid recovery from the fall in April 2020, which was in response to the nation-wide lockdown because of the pandemic. Employment had fallen from 6-6.5 million during January-March 2020 to 3 million in April. Employment scaled back to pre-pandemic levels in the October-December 2021 quarter when it averaged at 6.4 million. Since then, employment has been rising steadily in the metals industry. It touched 9.4 million in May 2022.

The heavyweight construction industry added 10 million jobs during April and May 2022 — approximately 4 million in April and another 6 million in May. Employment reached 72 million by May, which is the highest the industry has seen in a long time. Employment in the construction industry had recovered soon after the mobility restrictions were relaxed.

The services sector saw a less impressive increase in employment in May. After increasing by 6.7 million in April, the increase in May was a much smaller 0.5 million. At 7.2 million, the cumulative increase in employment in the services sectors during April and May 2022 was lower than that in the construction industry, which added 10 million during the two months.

Within the services industry, it is retail trade that leads in terms of growth in employment. As a result, retail trade became the largest employment industry outside of crop cultivation in April 2022, when it reached a peak of 72.9 million. Employment climbed down a bit in May, to 71.4 million.

The financial services industry has also seen a good recovery in employment since the onset of the pandemic. The industry employed 6.1 million in 2019-20. This increased to 6.7 million in 2020-21 and then to 7.83 million in 2021-22. By May 2022, this had inched up further to 7.85 million.

As India moves into its kharif sowing season in June, the demand for labour from agriculture is expected to increase. This could lead to an increase in the labour participation rate (LPR) and also the employment rate (ER). The unemployment rate could rise. But, if the LPR and ER rise well, an increase in the unemployment rate should not worry us too much.

The writer is MD & CEO, CMIE P Ltd