In May 2021, India’s labour participation rate at 40 per cent was the same as it was in April 2021. But, the unemployment rate shot up to 11.9 per cent from 8 per cent in April. Weekly estimates had foretold this increase. The weekly unemployment rate had touched 14.7 per cent in the week ended May 23. A stable labour participation rate combined with a higher unemployment rate implies a loss of jobs and a fall in the employment rate. The employment rate fell to 35.3 per cent in May 2021 from 36.8 per cent in April 2021. This is a very sharp fall for a single month. Except for the precipitous fall in the employment rate in April 2021 in the face of a nationwide lockdown, the employment rate has never dropped by 1.5 percentage points or more in any month in the past. May 2021 was therefore a particularly stressful month on the jobs front.
Over 15 million jobs were lost during May 2021. Employment fell from 390.8 million in April 2021 to 375.5 million in May 2021. This translates into a loss of 15.3 million jobs, or a 3.9 per cent fall in employment in the month. This is not as bad as the loss of 114 million in April 2020 but it comes second to only that draconian month of a complete nationwide lockdown. The May 2021 fall in employment is higher than the 12.3 million fall recorded in November 2016, the month of demonetisation.
May 2021 is also the fourth consecutive month of a fall in employment. The cumulative fall in employment since January 2021 is 25.3 million. Employment in January 2021 was 400.7 million. This has dropped to 375.5 million.
April and May 2021 witnessed a particularly severe fall in employment. They account for 22.7 million of the 25.3 million job losses in the past four months. This is the period of the severe second wave of Covid-19. During these two months, India witnessed lockdowns of varying degrees for different durations in different regions. It was a period of substantial disruption in economic activities which was bound to reflect in employment.
CMIE’s Consumer Pyramids Household Survey shows that the impact during these two months, particularly in May 2021 was severe on daily wage workers. Of the total 22.3 million jobs lost during April-May, 17.2 million were of daily wage earners. Business persons lost 5.7 million jobs during these two months and salaried employees lost 3.2 million. Labour has moved in and out of farmlands in a big way. In April, nearly 6 million left the farms because of the lean period. In May, over 9 million moved into farms as the kharif crop preparations begin around this time.
It is worrisome that in just April and May 2021 India lost 25 million non-farm jobs. It is possible some of these jobs will come back quickly when the lockdown conditions are eased. But, it is a reflection of the high informality and therefore the correspondingly high vulnerability of labour that is employed informally in India.
The real estate and construction industry took the biggest hit in employment during April-May 2021. It saw employment shrink by 8.8 million on a base of about 64 million in March 2021. Most of the employment in this industry is informal. Manufacturing industries took a hit of 4.2 million jobs on a base of 30 million. It is possible that most of these were in the medium and small scale industries. Hotels and tourism took a hit of 4 million on a base of 22.5 million. And, wholesale and retail trade saw employment fall by 3.6 million from 58 million in March. These industries are also employers of large numbers of informally engaged labour.
A feature that stands out in the current job losses is that its age composition is substantially different from the composition earlier. And, this could be an additional source of worry. In the past job losses were concentrated in younger age groups. This is not the case this time. Job losses are concentrated in the elder age groups.
The age group of 15-29 years did not see any job losses during April-May 2021. The age group of 30-39 years saw a net loss of 5.9 million jobs and those of 40 years of age or more saw a loss of 18.7 million jobs. Most of the job losses were borne by men. It can be conjectured that these middle-aged men were the main bread-earners of their families. It requires greater data analysis to conclude that the people who lost jobs during April-May 2021 were indeed the main breadwinners of their households. But, at the cost of some admittedly stereotyping of workers it may be worth worrying that the economic impact of these job losses on the households is more severe than it would have been if the job losses were mostly among the younger men and women.
As infections have started to decline, lockdowns may be eased in the near future. Some jobs may come back. But, recovery to the 2019-20 levels of 404 million jobs still seems very distant.