Unemployment rate 7.2% in January 2020

In January 2020, the unemployment rate in India was 7.16 per cent. This is substantially lower than the 7.6 per cent unemployment rate recorded in December 2019.

In recent months, the monthly unemployment rate seems to have stabilised at just below 7.5 per cent. But, month-on-month variations, at about 65 basis points, have been higher than in earlier years. Such variations have usually been between 30 and 50 basis points. The average monthly unemployment rate over the 12 months ended January 2020 is 7.4 per cent. During this period, the rate touched a high of 8.2 per cent in August 2019 and it dipped to a low of 6.7 per cent in March 2019.

The unemployment rate did cross 8 per cent in August and October 2019. But, it has been distinctly lower than that since October. While the unemployment rate did breach the 8 per cent mark twice, it did not seem to be able to sustain that level. The rate seems to have slipped down decisively below 8 per cent but it remains distinctly higher than 7 per cent.

Evidently, although the unemployment is quite high at about 7.4 per cent, it has stopped rising as it has been since mid-2017. The new phenomenon is a substantial increase in the month-on-month variations in the unemployment rate.

Besides the increase in monthly variations, there is an increase in the gap between rural and urban unemployment rates.

The urban unemployment rate is always higher than the rural unemployment rate. This seems counter-intuitive but it is true. Intuitively, we understand that rural regions cannot provide much meaningful work and therefore people migrate from villages to cities. If there are no jobs in rural regions then how can unemployment there be lower. And similarly, how can unemployment be higher in urban regions. The problem arises because of the way employment is defined. 

Household surveys capture all kinds of employment. But, all employment is not necessarily in productive work. Even disguised employment -- that which adds no real value and even that which is not even desirable or even recognised as a meaningful job by the person engaged in it, is considered employment. If a person is engaged in doing some work for pay or for profit independent of whether the work is meaningful, desirable, recognised or whether it adds any value or not, it is considered employment.

In rural regions, some members of a family may manage a farm and some of its members may go out to the cities to find better jobs. But, when they do not find jobs and return to their village they get absorbed into the family farms without displacing any of the others already working on the farms. This does not necessarily produce any more farm produce but now the farm employs more people than it did earlier. The additional people do not add any significant value or desire this work or even consider it as work. Yet, a survey will record this as employment.

If these members who returned to their villages had stayed in the cities they would have declared themselves unemployed because they were looking for jobs there but were unable to find any. But, when they did not find any job and therefore returned back to work on their farms, when they would honestly declare their activities to surveyors, the surveyors honestly record them as employed.

It is easier to remain employed in such a disguised manner in the rural parts. Rural India does not provide meaningful jobs like urban India provides but, it can keep people employed in unproductive or low-productivity disguised work.

But, this is possible only when rural folks have lands to till. Landless labourers who do not have land to fall back upon are the major source of the unemployed in rural regions. Besides, the educated who are not willing to work on the farms but continue to live in rural India form the bulk of the unemployed in the rural parts.

The rural unemployment was 6 per cent in January 2020. It was 6.9 per cent in December 2019 and had peaked at 8 per cent in October 2019. The fall in unemployment in rural India has been quite sharp. 

While rural unemployment fell, urban unemployment rose in January 2020. It touched 9.7 per cent compared to 9 per cent in December 2019. At 9.7 per cent the urban unemployment rate is close to its recent peak of 9.71 per cent in August 2019. 

While rural and urban unemployment rate have been very different, the divergence increased sharply in January 2020 to 3.73 percentage points.

While the unemployment rate is lower in rural India, it is also less meaningful. But, it has a bigger weight in the all-India unemployment rate. Therefore, what matters most is the unemployment rate in urban India, which has risen to 9.7 per cent in January 2020.



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