Vulnerable jobs

India’s June 2022 labour statistics are hugely disappointing. Employment fell by a massive 13 million from 404 million in May to 390 million. This is the biggest fall in employment during a non-lockdown month. Employment had risen by 8 million during April and May 2022. The fall in May has more than wiped out this gain. In fact, employment in June was the lowest in the last 12 months, i.e. since July 2021.

Labour markets shrunk during June. While about 13 million lost jobs during the month, the count of the unemployed increased by only 3 million. The rest exited the labour markets. As a result, the labour force shrunk by 10 million in June 2022.

This mass exit of labour shows up in the labour force participation rate, which shrunk to its lowest level at 38.8 per cent. It was 40 per cent in the preceding two months. The LPR has struggled to hang on to the 40 per cent mark for a long time. In the two years from June 2020 through May 2022, the LPR has hovered in the 39.5-41 per cent range. The fall to 38.8 per cent in June 2022 therefore is a sharp decline.

A shrunken labour force held back the unemployment rate from rising sharply. Nevertheless, the unemployment rate rose from 7.1 per cent in May to 7.8 per cent in June. The unemployment rate has mostly been between 7 and 8 per cent in recent times.

The employment rate fell to 35.8 per cent in June 2022. This is its lowest level in two years. Implicitly, less than 36 per cent of the working age population in India was employed in June 2022.

While this sharp fall in employment and an equally sharp deterioration in the principal labour market ratios are alarming, the worsening of the labour market is not widespread across the country. The June debacle was essentially a rural phenomenon. Also, the fall was located largely in the informal markets. It is possible that this is largely a labour migration issue and not a larger economic malaise that led to the fall in employment in June. We explain this in the paras below.

First, while total employment fell by 13 million in June, it increased by 0.1 million in urban regions. The massive fall was entirely in rural areas.

Labour market ratios worsened across rural and urban regions in June but the deterioration was far more pronounced in rural regions. Labour participation rate fell in rural India from 41.3 per cent in May to 39.9 per cent in June. This fall of 1.4 percentage points is much larger than the 0.4 percentage point dip in the LPR in urban India where it fell from 37.1 per cent to 36.7 per cent. The unemployment rate shot up by 1.4 percentage points to 8 per cent in rural India in June. However, in the towns and cities the unemployment rate declined by 0.9 percentage points to 7.3 per cent, which is the lowest unemployment rate in India in 16 months. The employment rate declined in rural India from 38.6 per cent to 36.7 per cent while in urban India it was almost unchanged.

June marks the onset of the southwest monsoon over the Indian subcontinent. Sowing of the kharif crop catches pace during this month. The monsoon’s progress till June 15 was patchy. Rains were 32 per cent below normal during the first fortnight. This could have slowed the deployment of labour into the fields. The agricultural sector shed nearly 8 million jobs in June. These were mostly in plantations. Crop cultivation added 4 million jobs. This is lower than the additions seen in June 2021 and June 2020.

Interestingly, while the agricultural sector as a whole shed jobs, people engaged as farmers increased by 1.8 million. Implicitly, the fall in employment in the agricultural sector was among agricultural labourers. The absorption of this labour is vulnerable to the vagaries of the monsoon.

The monsoon was sluggish till June 15 and the rural labour force participation rate fell during this period. Then, as the monsoon revived, the LPR improved as well. It is expected that as the monsoon picks up in the coming weeks, employment in rural India will revive.

This revival of rural employment is expected to be in the form of agricultural labourers. This labour would be supplied by the daily wage labourers, who lost jobs in large numbers in June. Of the 13 million job losses during the month, 12.7 million were of small traders and daily wage labourers. This loss was concentrated in rural India. In fact, rural small traders and daily wage labourers saw employment shrink by a massive 13.9 million. This loss was possibly transitional. As rains revive in July, this labour can be expected to be absorbed into the labour force.

It is worrisome that such large swathes of labour are so vulnerable to the vagaries of the monsoon.

The other worrisome data point is that June 2022 saw a fall of 2.5 million jobs among salaried employees. June also exposed the growing vulnerability of salaried jobs. The government shrunk the demand for armed personnel and opportunities in private equity-funded new-world jobs also started to shrink. The rain gods cannot save these jobs. The economy needs to grow at a faster pace than it may in the near future to save and generate such jobs.