There were several reasons for hope. Job growth in September was not in agriculture, which is often disguised unemployment, but in construction and food manufacturing, which appeared to be more sustainable.
The growth spread across rural and urban India. By mid-October, the employment rate had risen to 38.5 percent from 37.9 percent in September. There was good reason to believe that employment would continue to grow in October.
But this rise in the employment rate in mid-October proved to be short-lived. The rate came down to 37.6% and 37.1% over the following weeks. As a result, the month of October ended with an employment rate of 37.3 percent, which was lower than that of 37.9 percent in September. The drop in the employment rate in the middle of the festival season is surprising but also disappointing.
Equally surprising is the decline in the Labor Force Participation Rate (LWR) during the season. The LPR fell from 40.7% in September to 40.4% in October. Worse yet, despite the drop in the LPR, the unemployment rate fell from 6.9% in September to 7.8% in October. The unemployment rate has not been below 7 percent for more than a month and the average rate is close to 7.5 percent.
The labor force declined by 1.75 million and employment fell by 5.5 million in October from September levels. Total employment was 401 million in October 2021. The number of unemployed increased by 3.7 million, from 30 million in September to 33.7 million in October. In addition, the number of passive unemployed (those who were willing to work but not actively looking for work) also increased by 1.25 million, from 14.9 million to 16.2 million.
Rural India could not support the 280 million people it employed in September. This was the highest labor absorption by rural India since January 2020. In October 2021, rural India shed 6.2 million jobs to fall to 274.5 million. which corresponds to average employment in rural India in July and August 2021. The disproportionate increase in employment observed in rural India in September appears to be corrected in October.
Urban India performed better in October. It added 0.7 million jobs. It provides employment for 126.2 million. The urban employment rate improved from 34.6 percent in September to 34.7 percent in October. The unemployment rate fell from 8.6% to 7.4%. The only poor result in urban India was the labor force participation rate, which fell from 37.9 percent in September to 37.5 percent in October.
All major occupational groups in urban India – businessmen, wage earners and day laborers – recorded small employment increases in October.
In rural India, employment has been hit hardest by daily workers. Employment among day laborers in India fell by 19.6 million in October. It was the biggest casualty in the labor markets in October 2021. It all happened in rural India.
There has been a strangely large increase in the number of people reporting as business people. These people rose from 74.4 million in September to 79.7 million in October, an increase of 5.3 million. The number of businessmen is now close to what it was just before the Covid-19 pandemic hit India.
The increase in the number of business people is strange because these are not the best times to be an entrepreneur. Moreover, in October, the rise of businessmen was not accompanied by any increase in employees or even day laborers. The increase in employment as entrepreneurs is therefore more likely the result of saturation of employment opportunities and an increase in self-employment.
The saturation of employment opportunities also translates into increased employment among farmers. Being a farmer is also a form of self-employment. And self-employment is often disguised unemployment.
Employment increased in retail trade in October. This may be the result of increased trade during festival times. Retail trade absorbed an additional 3.4 million in October. Employment reached 63.5 million in this industry. This is close to the peak labor absorption of 64.4 million reached by this industry in August 2021.
The second largest absorber of additional labor in October was non-professional personal services. Employment there increased by 1.8 million, from 28.6 million in September to 30.3 million in October 2021.
Food industries which absorbed 2.5 million people in September lost 2.2 million in October. Construction which absorbed 5.6 million people lost a lot more 7.7 million in October. These rapid reversals of gains made in September to less than an October are disappointing. They underline the fragility of the recovery process.
Although the number of people claiming to be farmers increased by 9 million in October, the agricultural sector lost 2.4 million jobs. Implicitly, the blow was absorbed by the farm workers. We can see it in the drop in day laborers, including farm workers.
(The author is an economist and managing director of the Center for Monitoring Indian Economy.)