Unemployment rate down to 8.7%, LPR fall a cause for concern

Unemployment rate came down further to 8.72% for the week ended June 27 from 9.35% in the previous week, but still remained higher than 8.16% recorded at the beginning of the second Covid-19 wave in early April.

Centre for Monitoring Indian Economy’s (CMIE) MD & CEO Mahesh Vyas, however, noted that labour participation rate (LPR) has fallen during the week to 39.6% from 40.5% a week earlier.

“The unemployment rate has fallen on a fallen LPR. The LPR fell from 40.5% in the previous week to 39.6%. As a result, in spite of the fall in the unemployment rate, the employment rate has fallen from 36.7% in the previous week to 36.2% in the week ended June 27. This is not a good development,” Vyas told FE.

LPR is an age-specific proportion between persons either working or actively seeking work and the total population in working age group, usually 15 years and above. Unemployment rate is a ratio between persons who are not currently in job but are actively searching for one and the total labour force.

For the week ended June 27, however, both rural and urban areas have contributed to the decline in the overall unemployment rate. While in urban areas, the rate fell to 8.98% from 10.3% a week ago; the unemployment rate declined to 8.6% in rural areas from 8.92% on June 20.

On April 4, urban unemployment rate was 7.21% and rural unemployment rate was 8.58%, according to CMIE. Overall unemployment rate reached as high as 14.73% on May 23. In recent times, the highest rate of unemployment in rural areas was at 14.34% for the week ended May 16. In urban areas, the recent highest was recorded on May 30 at 17.88%.

The second Covid wave has led to a sudden spike in India’s unemployment rate – it rose to 11.9% in May (for whole month) from 7.97% in the previous month. The rate had last reached double digits in June last year, when it was 10.18%.

According to the CMIE data, barring April, May and June last year, the monthly unemployment had never breached the double-digit mark at least since January, 2016.

It reached its peak of 23.52% in April last year amidst country-wide lockdown, but started falling from the next month onwards. In May last year, country’s unemployment rate was 21.73%.