Urban unemployment falls sharply, rural job loss rate largely unchanged: CMIE

NEW DELHI: Reflective of the resumption in economic activities, India's urban unemployment rate fell to 17.08% in the week ended 7 June from 25.14% in the week ended 31 May, marking the lowest print since the lockdown began, according to data released by the Centre for the Monitoring of Indian Economy (CMIE).

The urban job loss rate now stands less than both the national (17.51%) and rural unemployment (17.71%) rates and is expected to come down gradually as more businesses open up, including the hotel and hospitality industry that were allowed to resume services beginning today.

Economists, however, believe that going forward the unemployment rate may prove sticky, given many medium and small enterprises have been winding up operations or plan to cut down workforce amid subdued demand. They said, in rural India where the unemployment rate is nearly 18%, demand for jobs under MNREGA will rise and be disguised unemployment once the sowing season draws to a close.

According to the CMIE data, the urban unemployment rate was the the lowest in 11 weeks and less than the 17.08% recorded on the week ended 22 March, two days before Prime Minister announced a nationwide lockdown to curb the spread of covid-19. Since then, and till the week ended May 31, the urban unemployment rate has hovered between 30.93% and 21.45%.

Job loss rate across India was 17.51% in the week ended 7 June compared with 20.19% in the week ended 31 May. The rural unemployment rate improved marginally to 17.71% in the week ended 7 June from 17.92% in the week earlier. The national and rural unemployment rates, however, were more than double the figures recorded in the week preceding the lockdown.

“The only reason why the numbers may have come down is because of the nature of lockdown now. From a massive nationwide closure to opening of the economy must have created some opportunities, let’s say for a shop owner to go to his store, a street vendor going out with his vegetables or essential items to sale. Overall, the service sector – small or big seems opening up gradually,” said Praveen Jha, a professor of economics at the Centre for Economic Studies and Planning at JNU.

“I don’t think the economy or the employment space will make a ‘V-shape’ recovery. At max it will be an ‘U shape’ recovery and will take at least two years to be in a stable situation. And this only if we manage to control the covid-19 pandemic within six months,” said Jha who specialises in labour and development economics.

Arup Mitra, a professor of economics at Institute of Economic Growth in New Delhi, said the employment scenario will improve as the economy unlocks and sectors such as hotel and hospitality, supply chain and e-commerce activities pick up.

"But before you draw solace in the numbers, we must realise that rural India and urban India both have disguised unemployment and it’s a good companion of poverty," Mitra said.

Both Mitra and Jha argued that the covid-19 disruptions have given an opportunity to policy makers and governments to plan and prioritise rural economy.

“The covid-19 disruption has given an opportunity to fix the rural economy, but administrators are largely clueless about rural economy. Unless we fix that, unemployment situation won’t improve much,” said Jha.

Mitra said a boost to rural infrastructure and rural industry can accommodate more people in decent work "else informality and inadequate livelihood options will continue to thrive. And that’s among other things is a key reason why the demand for rural job scheme has gone up recently."