Data Focus

Urban unemployment rate hits a 30-month low in Feb

Annapurani V Chennai | Updated on March 19, 2021

Low workforce participation, economy opening up key reasons for dip

The estimated unemployment rate for urban regions in India hit a 30-month low in February 2021. It fell to 6.99 per cent, the lowest since August 2018, according to data from CMIE. The overall unemployment rate for the month stood at 6.9 per cent and, for rural regions, it was 6.86 per cent.

Economy opening up

The fall in unemployment can be attributed more to the opening up of the economy, which is more pronounced in urban areas, said Madan Sabnavis, Chief Economist, CARE Ratings, adding, “Migrants who left have started returning and hence the unemployment rate looks better. Also, a technical factor in calculation needs to be noted. If a person has moved from urban to rural area during the pandemic, he would cease to be counted in the urban area as the headcount also reduces to this extent. This gives a positive bias to the numbers.”

Besides, with the economy opening up, sectors such as financial services, real estate and construction that employ a chunk of the labour force, recorded a good growth in the October-December quarter last year, as a result of which unemployment rates have been falling, experts said.

 

Weak environment

Unemployment rates going below pre-Covid levels could also be attributed to falling labour force participation and several people have stopped looking for a job, said Rajani Sinha, Chief Economist and National Director – Research, Knight Frank.

“For example, a fresh graduate looking for a job was in the job market and, hence, was included in the unemployment data, but now he/she might have opted out because the economic environment is still weak, and the chances of getting a job are less, ” Sinha explained.

The estimated labour force participation rate in the urban regions has been declining slowly over the past year. It plunged from 40.48 per cent in February 2020 to 32.47 per cent in April 2020, rose again to 38.93 per cent in August, but slowly fell to 37.25 per cent in February 2021, CMIE data showed.

Not at pre-Covid levels

Knight Frank’s Sinha said that though the economy has started improving, things are still not back to pre-Covid levels. A lot of people have lost jobs, especially in the unorganised sector. Many services sectors, that are large employment generators like hotel, travel, tourism, retail sectors, are still struggling to recover from the pandemic-induced crisis.

Kaushik Banerjee, Vice-President and Business Head of Teamlease.com and Freshersworld.com, concurred that opportunities across different job platforms have not reached pre-Covid levels, and will take another one quarter to get there.

He said blue-collar jobs are higher than pre-Covid levels because of the need for resources such as delivery personnel; so, their hiring has also gone up. But white-collar jobs for engineers and MBA graduates haven’t reached pre-Covid levels as yet, and would take time. However, with the current increase in the number of coronavirus infections and lockdown being imposed in many areas, unemployment rates could go back to the earlier levels, said experts.

“We have seen extreme volatility in the IIP numbers, which, combined with the now magnified localised lockdowns, has affected business sharply, leading to uncertainty. This will militate against getting back to the earlier labour stock,” Sabnavis said.

Published on March 19, 2021

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