The first half of November 2019 saw a sharp fall in the labour participation rate. In August, September and October, labour participation rate was a little over 43 per cent. This was an improvement over the sub-43 per cent rate prevailing in the preceding six months.
In comparison, the labour participation rate in the weeks ended November 3, November 10 and November 17 was 41.6 per cent, 42.6 per cent and 41.8 per cent. The rate seems to be heading below 42 per cent in November.
In November 2018, the LPR was 42.8 per cent.
If the LPR ends below 42 per cent in November 2019, it would be the lowest LPR witnessed since 2016.
Weekly data is volatile and it is not wise to generalise from the dip seen in just one week as was seen in the week ended November 3. But, the week ended November 17 has once again fallen to sub-42 per cent levels. This warrants some concern regarding the strength of the recovery in the LPR seen in the past few months.
The LPRs in August, September and October 2019 were systematically higher than the levels recorded in the corresponding months of 2018. This is the first time we have seen such a sustained year-on-year increase in the LPR. This was sufficient to start believing in a possible revival of the LPR after a long period of steady fall and then an equally long period of stagnation at low levels. Very early signs of November threaten this belief.
The fall in labour participation in the week ended November 3 was concentrated in rural India. Here, the LPR fell 204 basis points from 44.2 per cent in the week ended October 27 to 42.2 per cent in the week ended November 3. Rural LPR did recover in the week of November 10 to 43.3 per cent but, it fell again to 42.9 per cent in the week ended November 17.
In urban India, the LPR fell only marginally in the week ended November 3. But, it fell sharply in the week ended November 17. This fall was a steep 155 basis points from 41.1 per cent to 39.6 per cent.
Data of the first half of November 2019 also show a sharp fall in the employment rate. This implies that there is either a shrinking of employment in the month or at least a slower growth in employment compared to the growth in working age population.
The average employment rate in the three weeks that ended in November 2019 was 38.8 per cent. If the month ends with an employment rate less than 39 per cent, it would be the lowest employment rate recorded since 2016 when we began measuring labour statistics.
The employment rate has fallen in rural and urban India. The fall in urban India appears to be more worrisome than the one in rural India.
Urban employment rate appeared to have bottomed out in August 2019 at 36.9 per cent. It inched up a bit to 37 per cent in September 2019 and then, it shot up to 37.4 per cent in October. Now, in the first half of November it seems to have slipped again to less-than 37 per cent.
The long-term trend of the employment rate in urban India is one of steady decline. August and September 2019 had provided hopes of some respite from this. However, November 2019 could belie these implying a continuation of a long term trend of falling employment rates.
Unlike urban India, the country side has seen a somewhat volatile stabilisation of the employment rate in the past 14 months. The employment rate had declined steadily from 43 per cent in November 2017 to 40.8 per cent in August 2018. Thereafter, the employment rate has remained around this level with substantial month-to-month variations. It is possible to read the decline in rural employment rate in November as part of these monthly variations.
Nevertheless, early indications of a decline in overall labour participation and employment rates in November is worrisome.