The demand for workers has snapped back faster than many economists expected, with India’s urban unemployment rate dropping below 7 per cent in February, the lowest in more than two years.
Urban joblessness fell to 6.99 per cent in February from 8.08 per cent in January, according to the Centre for Monitoring Indian Economy (CMIE), mirroring the gradual revival of the economy.
But economists warned the number overstates the health of the job market as the labour force participation rate, or the number of people who are either working or looking for work, has declined.
“Low unemployment rate and high labour force participation rate (LPR) are what the labour market desires, but we are far from there. People are back in urban centers doing sundry jobs due to financial constraints,” said Arup Mitra, a professor of economics at the Institute of Economic Growth in Delhi. “Only gainful employment will revive demand and aid the economy to grow faster.”
Urban unemployment shot up to as high as 25 per cent after the lockdown was announced last March and remained considerably above the comfort level of policymakers until last month, even as joblessness in the rural areas recovered.
The rural unemployment rate, however, climbed a percentage point to 6.86 per cent in February from 5.83 per cent in the previous month.
Overall national joblessness also rose to 6.9 per cent from 6.53 per cent a month ago, indicating the jobs crisis in India is anything but over.
The revival in the urban job market is in sync with recent surveys that showed employment and business outlook have improved, and businesses are looking to the rest of 2021 positively. The Aon annual India salary survey in February showed 93.5 per cent of organizations expect an improved or stabilized business outlook. And only 4.3 per cent companies surveyed said they will retain a hiring freeze in 2021.