October PMI: Will the rebound in employment growth sustain?

Purchasing Managers’ Index (PMI) data shows that employment picked up in October, both in the manufacturing and services sectors.

As the chart alongside shows, hiring has improved to 53.2 in the services sector, the second fastest rise since March 2011. PMI data is based on surveys, and a reading above 50 denotes growth, while one below 50 signals a contraction. Job creation also gathered pace in the manufacturing sector, but was weaker than that recorded in the services sector.

Although this improvement is heartening, the moot question is if it will sustain. That is simply because the increase in hiring could well be driven by the run-up to the festive season and may lose momentum in the coming months.

Also, while the headline PMI numbers for October are impressive, the relentless input cost pressures along with the forthcoming general election are weighing on the outlook of Indian businesses.

Pollyanna De Lima, principal economist at IHS Markit and author of the report, said, “With business expectations about future activity dropping to the lowest for 20 months in both the manufacturing and service sectors, firms are becoming more guarded in the face of growing uncertainties. The sustainability of current market conditions and political worries both weighed on optimism and pose downside risks to growth.”