Elusive jobs growth

Current trend could have significant political implications

A recent report by the Bureau of Labour Statistics, which tracks quarterly changes in employment across some major sectors, should cause some disquiet within policymaking circles. For the January-March 2015 quarter, it estimates that the aggregate number of jobs created across its survey establishments was 64,000, which is the lowest number over the four quarters of the fiscal year 2014-15. In fact, the trend over the year was significantly negative, with the number of new jobs declining from 182,000 to 158,000 and then to 117,000 in the first three quarters. Of course, in all these quarters, the number of jobs created was higher than in the corresponding quarter of 2013-14. In fact, in the last quarter of that year, there was actually a decline of 36,000 jobs. But, this should provide little relief to the government, because it will eventually be judged in terms of its ability to energise and speed up the process of job creation. If the trend observed over the year persists, it could have significant political implications.

Looking beneath the aggregates, the picture becomes somewhat bleaker. Of the relatively labour-intensive manufacturing sectors, only textiles saw an increase in jobs and, that too, by only 24,000 in the January-March quarter of 2015, far below the 56,000 jobs it had lost in the same period of 2013-14. Leather, gems and jewellery and the handloom/powerloom sector together lost a total of 16,000 jobs. Automobiles, among the more capital-intensive sectors, generated 20,000 jobs, while metals contributed a mere 1,000. Two service sectors are covered by the survey. Transport shed 2,000 jobs, while, in contrast, information technology and business process outsourcing sector was the star performer, with 37,000 jobs being created, more than half the total. In fact, over the whole of 2014-15, this sector accounted for 234,000 jobs, about 45 per cent of the total number of jobs generated.

Clearly, the survey covers a relatively small number of establishments and the absolute numbers reflect this. However, presuming that the sample is sufficiently representative, there is no evidence that the apparent recovery in manufacturing is leading to a substantial number of new jobs being created. The spectre of jobless growth has haunted the Indian growth and development narrative for decades. The Bharatiya Janata Party's election campaign strongly projected its intent and capability to deal with this critical issue. However, the data, at least for the first three quarters of its five-year term, suggest that it has simply not been able to change the pattern of heavy dependence on information technology and information technology-enabled services for job creation. Of course, the government could take the view that this is only the negative legacy playing itself out and things will only improve in subsequent years. But, that expectation must be founded on something concrete, like an acceleration in investment that will create new capacity and new jobs. There are few signs of this happening; investments as a share in gross domestic product in the April-June quarter of 2015-16 were below 30 per cent, a rather anaemic number. Nor are the portents for a sharp revival in the investment cycle very good. Domestically, notwithstanding the very welcome upturn in highway construction, infrastructure remains a bottleneck. Globally, a slowing Chinese economy means excess capacities there and elsewhere in virtually all tradeable goods. This makes domestic structural reforms all the more critical.