March's Employment Figures Disappointing

The fall in the employment rate translated into a 2.6 million fall in absolute employment between December 2022 and March 2023.
Most of this fall was in March 2023.

Headline labour market metrics of March 2023 turned out to be disappointing.

The unemployment rate climbed from 7.5 per cent in February 2023 to 7.8 per cent in March; the labour participation rate fell from 39.9 per cent to 39.8 per cent and the employment rate dropped from 36.9 per cent to 36.7 per cent in the same months.

India's unemployment has remained elevated throughout 2022-2023. Each of the quarters of the year had an unemployment rate of over 7 per cent.

The average monthly unemployment rate during the fiscal was 7.6 per cent.

The first half averaged at 7.4 per cent while the second half saw the unemployment rate rise to an average of 7.8 per cent.

Trends during the year do not suggest any mellowing of the unemployment rate.

The labour participation rate (LPR) seems to have settled at sub-40 per cent levels in 2022-2023.

This is lower than the 40.1 per cent LPR in 2021-2022.

The LPR climbed well towards the end of 2022, but this increase in labour in the labour markets seems to have caused a spike in the unemployment rate.

The LPR had peaked at 40.5 per cent in December 2022.

This led to the unemployment rate spiking to 8.3 per cent in the month.

The markets couldn't offer the jobs corresponding to the rise in LPR. The LPR rolled back in January 2023.

The labour markets have been weak during the last quarter of 2022-2023.

The LPR has lost substantial ground as it fell from 40.5 per cent in December to 39.8 per cent in March 2023.

The fall in the unemployment rate during this period is small -- from 8.3 per cent to 7.8 per cent.

The weakness of the labour markets is best reflected in the employment rate.

The employment rate fell from 37.1 per cent in December 2022 to 36.7 per cent by March 2023.

This fall in the employment rate translated into a 2.6 million fall in absolute employment between December 2022 and March 2023. Most of this fall was in March 2023.

Employment fell by 2.27 million in March 2023. This is the net fall in employment after significant churn in the labour markets during the month.

Labour has moved substantially in what appears to be shifting seasonal demand.

Employment in construction fell by 9.58 million in March. This is an exceptionally large fall.

It is comparable to the 11.6 million fall in employment in the construction industry in May 2021 in the wake of the second wave of the pandemic.

Employment in the industry fell from 72.34 million in February to 62.76 million in March.

The next biggest loss of employment in March was in the retail trade industry.

Employment here fell from 75.75 million in February to 67.65 million in March.

This loss of nearly 8 million jobs again, is the largest fall in the industry since the second wave of COVID-19 in May 2021.

It appears that these large declines in employment in construction and retail trade are not necessarily a fall in the demand for labour in these industries but a likely seasonal shift of labour to farmlands in preparation to harvest the rabi crop.

Agriculture saw a 17.23 million increase in employment in March. An increase in employment in agriculture in March is normal.

But a 17 million surge is the highest we have seen since we started monitoring employment in 2016.

The increase in employment in agriculture in March 2022 was 15 million. Earlier, it was even less.

Within the agricultural sector, labour has moved from allied activities to crop cultivation.

Nearly six million labourers moved out of allied activities, poultry, plantations and fishing into crop cultivation.

This is a clearer indication of movement of labour for harvesting the rabi crop.

The addition of labour into crop cultivation was a massive 23 million in March.

This massive movement of labour from one sector to another within short time intervals reflects the extraordinary mobility of labour in response to demand in India.

But it also reflects the large informal and precarious nature of employment.

It remains moot whether the construction and retail industries can afford to release labour in such large quantum during harvest periods.

Can labour go back to these industries after the harvest and can these industries remain correspondingly in limbo in the meanwhile?

The average monthly variation in employment in agriculture is 0.28 per cent but the standard deviation of this variation is large at 5.5 per cent.

The median monthly variation is -0.63 per cent.

Agriculture absorbs labour in large parcels in some months and then releases labour after just one month in smaller parcels over multiple months.

This explains these descriptive statistics.

In March 2022, it had increased labour absorption by 10.4 per cent and then shed labour by 3 per cent, 6 per cent and 6 per cent in the following three months.

In March 2023, agriculture saw a 12 per cent increase in labour absorption.

We can expect labour to be released from agriculture in the following 2-3 months.

Agriculture accounts for nearly 40 per cent of the total employment in India.

According to the government's Periodic Labour Force Survey, it is even higher.

The substantial volatility of employment in this large labour-intensive sector renders large parts of the Indian labour vulnerable.

Mahesh Vyas is MD & CEO, CMIE