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Urban unemployment rate falls sharply as economy opens up

According to CMIE data, the urban unemployment rate is the lowest in 11 weeks. (Photo: Mint)Premium
According to CMIE data, the urban unemployment rate is the lowest in 11 weeks. (Photo: Mint)

  • The urban unemployment fell to the lowest level since the lockdown was announced at 17.08% in the week to 7 June from 25.14% in the week ended 31 May the CMIE report said
  • The urban job loss rate is now less than both the national (17.51%) and rural unemployment (17.71%) rates the report said

NEW DELHI : The urban job loss rate dropped 8 percentage points in the first week of June from the preceding seven days, in a sharper-than-expected turnaround as the government lifted nearly all lockdown-related curbs, allowing factories and offices to reopen.

Urban unemployment fell to the lowest level since the lockdown was announced at 17.08% in the week to 7 June from 25.14% in the week ended 31 May, according to data released by Centre for Monitoring Indian Economy (CMIE). The rate is expected to decline as more economic activities such as hospitality sector open up.

The reduction in the number of jobless people in urban areas indicates the economy is slowly recovering from the government-imposed shutdown to stem the spread of the coronavirus. But economists warn job gains are likely to be stubbornly slow and unevenly spread as many small businesses are either winding up or plan to cut jobs amid weak demand.

“The only reason why the numbers may have come down is because of the nature of the lockdown now. Moving from a massive nationwide closure to the 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 sell," said Praveen Jha, professor of economics at the Centre for Economic Studies and Planning at Jawaharlal Nehru University. “I don’t think the economy or the employment space is making a ‘V-shaped’ recovery. At max, it will be a (more gradual) ‘U shaped’ recovery and (the economy) 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."

To be sure, joblessness is still far higher than what it was before the nationwide lockdown began on 25 March.

According to CMIE data, the urban unemployment rate is the lowest in 11 weeks. The previous low of 8.66% was recorded in the week to 22 March, three days before the stringent lockdown. Between then and the week ended 31 May, the urban unemployment rate has hovered between 30.93% and 21.45%. The urban job loss rate comes close on the heels of a similar situation observed in rural India last week when unemployment dropped over seven percentage points, but remained largely unchanged this week.

Still, the urban job loss rate is now less than both the national (17.51%) and rural unemployment (17.71%) rates.

In rural India, where unemployment is still nearly 18%, demand for the rural job guarantee scheme will go up, economists said. In addition, there will be disguised unemployment, or very low-paying employment, once the sowing season of new crops ends in a few weeks.

The employment scenario will improve further as the economy unlocks, said Arup Mitra, a professor of economics at the Institute of Economic Growth in New Delhi. “But before you draw solace in the numbers, we must realize rural and urban India both have disguised unemployment and it’s a good companion of poverty," Mitra said.

Both Mitra and Jha argue the covid-19 disruptions have given policymakers and governments an opportunity to plan and prioritize the rural economy.

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

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