Official quarterly real GDP changes in India mostly reflect the performance of the organised sectors. Employment data from CMIE
covers both, the organised and unorganised sectors, much better. It seems to provide a reasonably good insight into the direction in which the economy is likely moving. The advantage with the employment data is that it becomes available much faster than the GDP data.
The GDP data
are released two months after the quarter ends. The employment data, on the other hand, is available on the day immediately following the day the quarter ends. More importantly, the employment data is also available month by month and week by week. These monthly and weekly estimates provide an early idea of where the quarter is likely to end.
So, what do the employment data tell us about the recovery in the third quarter of fiscal 2020-21, 10 weeks into it? To answer this, we understand the recovery process, or its momentum and then make an estimation.
In the quarter ended March 2020, total employment in India was estimated at 406 million. This fell sharply to 320.6 million in the first quarter of fiscal 2020-21, ie the quarter ended June 2020. Much of this fall was recovered in the quarter ended September 2020 when employment was back to 394.9 million. It was still short of the level in the March 2020 quarter and of the year-ago quarter. Nevertheless, it was an impressive and quick recovery.
Employment in each month of the second quarter was higher than it was in its preceding month. The recovery was progressing. But, it was progressing increasingly at a slower pace in each of these months. This is partly understandable because the initial gains can be large as self-employed persons got back to their trade when the economy opened up and desperation drove daily wage labourers to accept any form of employment even at lower wage rates. Soon these options were exhausted and the pace of recovery slowed down during the second quarter.
In the first month of the current, third quarter, employment stopped registering any further gains. It slid. Half a million jobs were lost in October compared to the September estimate. This is statistically too small and insignificant. It could very well be the case that there was no change in employment from September to October. But, even that would be a poor outcome.
In November 2020, employment fell by a significant 3.5 million. Cumulatively, employment has fallen by four million during these two months. At 393.6 million in November 2020, employment is still about 10 million short of what it was in the March 2020 quarter.
Weekly estimates for the first three weeks of December indicate a likely marginal improvement in aggregate employment compared to November. We only generate the three major ratios on a weekly basis and not the aggregate values, such as the number of people employed. The labour force participation rate (LPR) has improved. At 41.4 per cent, the average LPR in the first three weeks of December was significantly higher than November’s 40 per cent. However, the enthusiasm of this labour in entering the labour market was met with a very high unemployment
rate. The unemployment
rate shot up from 6.5 per cent in November to 9.5 per cent average in the first three weeks. As a result, the employment rate has risen marginally, from 37.4 per cent in November to a three-week average of 37.5 per cent. With this, unless there is a big surprise in the last ten days of December, it is likely that employment could close at 394 million in December 2020. And, the third quarter of fiscal 2019-20 would end with employment of 395 million.
This implies that employment in the quarter ended December 2020 would be 2.5 per cent lower than the 405 million employed in the December 2019 quarter. Apparently, the economy would shrink marginally les than it did in the September 2020 quarter.