The jobs bloodbath of April 2020

by Mahesh Vyas

The unemployment rate shot up to 27.1 per cent in the week ended May 3. This is the highest unemployment rate so far. It seems to have risen because of a surge in the labour participation rate from 35.4 per cent in the week of April 21 to 36.2 per cent in the week ended May 3. The spike in the unemployment rate indicates that this surge in job seekers was highly disappointed. They could not find jobs. Their addition to the labour force merely raised the unemployment rate.

Evidently, the hope and the desperation described last week (Hope in a desperate situation) just got worse in the most recent week. The surge in labour participation during a lockdown reflects hope and desperation. The simultaneous increase in the unemployment rate reflects disappointment.

The unemployment rate in the month of April 2020 was 23.5 per cent. Data for the first week of May indicates that the rate could climb further. This worsening should be expected as the lockdown continues to get prolonged. Initially, a lockdown only hurts the most vulnerable labour that is informally employed in unorganised sectors. Gradually, it starts hitting the more secure jobs. Start-ups have announced lay-offs and industry associations have warned of job losses. Even NASSCOM, India’s IT association with over 2,800 member companies, has warned of job losses. These are not mere warnings anymore because job losses are seen across all types of employment.

The Consumer Pyramids Household Survey estimates that employment fell by a massive 114 million in April 2020. In March 2020, employment had already dropped to 396 million. This was the lowest employment since we started measuring it over four years ago. Even this low level dropped dramatically by 29 per cent to 282 million in April 2020.

Average employment during 2019-20 was 404 million. Compared to this, the fall in March was a minor 2 per cent. But, they still added up to 8 million job losses. Compared to the same average of 2019-20, the fall in April is a massive 30 per cent, which translates into a loss of 122 million jobs. This is a mind boggling loss of jobs.

It is not surprising that small traders and wage labourers account for most of these losses. They have been the most severely hit during the lockdown. Employment among these dropped from an average of 128 million in 2019-20 to 116 in March and then, just 37 million in April. A massive 91 million lost their livelihood in just about a month. This is not just a mind-boggling number. It is a human tragedy because these are perhaps, the most vulnerable parts of society.

This category includes hawkers and daily wage-earning labourers whose livelihood depends everyday on a functioning economy. They eke out a living out from their daily earnings and are therefore the most vulnerable to the economy shutting down. A prolonged shutdown is their worst nightmare. 91 million of these lost their employment in April 2020. An estimated 71 per cent of them lost employment.

Larger entrepreneurs, those with fixed assets, have also reported large employment losses. 23 per cent of them reported loss of jobs. This is interesting because a business person usually does not declare a status of being unemployed unless the loss has a degree of irreversibility. A business person would declare being unemployed if she feels that her business is destroyed for all practical purposes. The large scale loss of employment among business persons is an indication that the loss during the lockdown is not limited to just jobs but also to enterprise. It is very likely that about a quarter of all businesses have been shut for good in such a prolonged lockdown.

18 million business persons are estimated to have lost employment in April 2020. The average count of larger entrepreneurs was 78 million in 2019-20. This fell to 60 million in April 2020.

A similar quantum of loss can be seen among the coveted salaried employees. Their count dropped from 86 million in 2019-20 to 68 million in April 2020. This implies a drop of 21 per cent. Or, one in every five salaried employees seems to have lost jobs during the lockdown.

Salaried jobs have not been growing. They have remained mostly in a narrow band of 80-90 million in the past three years. The fall to 68 million is therefore hard. Arguably, and hopefully, the street hawker may return to her beat after the lockdown. Her challenge is to survive the lockdown. However, the challenge for the salaried employees could be to get the job that was lost during the lockdown. Salaried jobs are not easy to get.

The odd-man in this jobs bloodbath is agriculture. The count of farmers increased in March and April 2020. The count of farmers increased by 6 million or by 5 per cent in April 2020 compared to the average count of farmers in 2019-20. This is not surprising. When jobs evaporate in other sectors, people revert back to their farms which seem to have an infinite capacity to absorb labour but unfortunately that employment is mostly disguised unemployment.

Published first in Business Standard Link