Job losses may have narrowed

by Mahesh Vyas

The week ended May 24 recorded an unemployment rate of 24.3 per cent. This is a shade higher than the 24.0 per cent unemployment rate recorded in the preceding week. It is also a tad higher than the average unemployment rate of 24.2 per cent seen in the past 8 weeks - the weeks of the lockdown. The unemployment rate therefore continues to remain very high at over 24 per cent during the lockdown.

The labour participation rate was 38.7 per cent in the week ended May 24. This was lower than the 38.8 per cent recorded in the preceding week. This fall in the labour participation rate comes after three weeks of continuous increases.

While the unemployment rate has been reasonably stable around 24 per cent during the lockdown, the labour participation rate trend seems to tell a story of some interesting changes in the labour markets.

The unemployment rate has risen from 8.8 per cent in March to 23.5 per cent in April and seems to have remained stable at the elevated rate of around 24 per cent in May.

The labour participation rate, on the other hand, which had dropped 6.3 percentage points - from 41.9 per cent in March to 35.6 per cent in April, seems to be regaining a substantial part of the lost ground in May. The LPR has been rising almost consistently week-after-week in the month. It reached 38.8 per cent as of the week ended May 17 indicating a recovery of nearly half the lost ground of April. The small fall in the latest week does not take away this evidently rising trend.

So, it seems that a fairly large chunk of labour that had technically left the labour markets in April is returning back.

CMIE’s Consumer Pyramids Household Survey provides us with an interesting insight here. In April, the labour force had shrunk by 68 million - from 437 million in 2019-20 to 369 million in April. These 68 million had stopped actively looking for jobs. Interestingly, they had not stopped being interested in jobs. This is evident from the fact that the greater labour force increased by 9 million from 449 million in 2019-20 to 458 million in April.

The greater labour force is a count of the number of people who are willing to work. Some of these could be actively looking for a job and some may not be looking for a job. The greater labour force therefore includes three kinds of people - those who are employed; those who are unemployed, are willing to work and are actively looking for a job; and those who are unemployed, are willing to work but are not actively looking for a job. The labour force includes only the first two.

What happened in April is as follows. The count of employed shrunk by 122 million. If we give up being pedantic we can say that 122 million lost their jobs. But, all of them did not keep looking for jobs after they lost it. The count of unemployed who were looking for jobs increased by only 53 million. What happened to remaining?

The data suggests that they were also willing to work but did not actively try to look for jobs. These people possibly need a job but are apparently so discouraged by the large scale loss of employment around them that they consider it completely futile to actively look for jobs. The numbers of such people swelled by 77 million - from 12 million in 2019-20 to 89 million in April. These are the potentially unemployed but technically not considered unemployed.

Since these people are willing to work, they can easily join the labour force and start looking for jobs if employment conditions improve even marginally.

The weekly estimates of May seem to suggest that there is a migration of labour from the ’willing but not looking for jobs’ category to the ’willing and looking for jobs category’. The discouraged workers seem to be coming back to look for jobs. This is good news.

Interestingly, the weekly data also suggests that this influx into the labour markets is succeeding in finding jobs.

The evidence to this is in the stable unemployment rate even in the face of a rising labour participation rate.

A stable unemployment rate and a rising labour participation rate imply an increase in the employment rate. This has indeed increased from an average of 27 per cent through most of April to 29 per cent through most of May. This two percentage point increase implies that about 20 million people may have been added to the count of those that are employed. Implicitly, the loss of 122 million in April may have narrowed down to 102 million in May.

If 20 million jobs have indeed been repaired, we have made significant progress. But, the remaining challenge is five times larger at 102 million.

Published first in Business Standard Link

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.5 +1.4
Consumer Sentiments Index
Base September-December 2015
57.1 0.0
Consumer Expectations Index
Base September-December 2015
58.6 0.0
Current Economic Conditions Index
Base September-December 2015
54.8 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Jun 20 Sep 20 Dec 20 Mar 21
New projects 0.96 1.40 1.16 1.41
Completed projects 0.26 0.73 0.83 0.62
Stalled projects 0.11 0.08 0.31 0.14
Revived projects 0.68 0.29 0.11 0.13
Implementation stalled projects 0.09 0.07 0.15 0.30
Updated on: 21 Apr 2021 8:28PM
Quarterly Financials of Listed Companies
(% change) Jun 20 Sep 20 Dec 20 Mar 21
All listed Companies
 Income -27.7 -6.3 1.6 7.4
 Expenses -27.9 -10.3 0.2 4.6
 Net profit -40.5 47.2 57.6 18.7
 PAT margin (%) 5.2 8.3 8.4 20.6
 Count of Cos. 4,399 4,401 4,372 41
Non-financial Companies
 Income -37.4 -10.5 0.2 8.2
 Expenses -37.7 -14.2 -0.7 6.0
 Net profit -56.0 31.5 54.3 16.7
 PAT margin (%) 4.5 8.1 8.9 20.2
 Net fixed assets 5.9 1.1
 Current assets 0.7 1.9
 Current liabilities -2.7 4.9
 Borrowings 8.3 5.8
 Reserves & surplus 4.2 5.9
 Count of Cos. 3,265 3,266 3,252 29
Numbers are net of P&E
Updated on: 21 Apr 2021 8:28PM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.0 -6.6
 Expenses 13.6 0.0 -7.8
 Net profit 15.2 -9.5 1.7
 PAT margin (%) 2.1 2.2 10.4
 Assets 9.6 7.8 0.7
 Net worth 8.5 4.4 -0.1
 RONW (%) 3.8 3.6 11.7
 Count of Cos. 30,747 29,337 38
Non-financial Companies
 Income 13.9 -1.9 -7.0
 Expenses 14.1 -1.7 -8.3
 Net profit 21.6 -19.8 2.2
 PAT margin (%) 2.9 2.5 11.0
 Net fixed assets 5.5 8.9 -0.6
 Net worth 8.1 2.1 -0.2
 RONW (%) 6.4 5.1 13.3
 Debt / Equity (times) 1.0 1.0 0.1
 Interest cover (times) 2.3 2.0 23.1
 Net working capital cycle (days) 72 70 37
 Count of Cos. 24,611 23,388 30
Numbers are net of P&E
Updated on: 19 Apr 2021 9:56PM