Employment increases in July 2019

July 2019 recorded a sharp increase in employment in India. At 405 million, employment during the month was over 4 million higher than it was a month ago, in June 2019. Even compared to a year ago, it was a substantial 3.9 million higher.

There is a perceptible improvement in the monthly employment time-series data. During 2017, employment estimates varied between a narrow range of 403 million to 409 million. The average monthly employment estimate was 406.5 million. In 2018, employment fell to an average of 401 million. This average improved to 402 million during the first four months of 2019.

In comparison, the 405 million employed for July 2019 is even better. The fall in employment that was witnessed in 2018 has been arrested.

But, the composition of the increase in employment witnessed in July is neither sustainable nor even desirable.

The increase in employment during July 2019 is entirely from the rural regions. Urban regions saw a 2.5 million decline in employment from 128.7 million in June 2019 to 126.1 million in July 2019. By the same comparison, rural India saw employment increase by a massive 7 million -- from 272 million to 279 million.

This increase in employment in rural India is predominantly among farmers. While overall employment increased by 4 million, employment among farmers increased by 3.2 million. The rest was from small traders.

Such employment is necessarily seasonal and the increase therefore is not part of sustainable growth trajectory. Once the agricultural season is over, these people may be forced to move out of employment again unless other avenues of employment emerge.

Growth in such employment is also not desirable. We need to move jobs out of the low-productivity agricultural sectors into higher productivity and higher wages jobs in the industrial and services sectors. The agricultural sector is already more labour-intensive than desired.

Employment in agriculture during the current kharif season is higher than it was in the previous year. Compared to a year ago, employment among farmers in June and July 2019 was 10 and 13 million higher. This is surprising because rains have been errant this year and sowing was lower than it was in the comparable period last year. The only possible explanation to this is that grown-up people who do not get gainful jobs report themselves as employed in agricultural activities because during a crop season, they could be engaged in at least some preparatory work on the fields.

This happens in the case of grown-ups since the younger generation continues to look for a better job outside agriculture. Prima facie, data does lend some weight to this hypothesis.

The increase in employment during July 2019 came largely from the 35-49 year age group. Nearly six million jobs were added in this age-bracket. Much of this was offset though, by job losses in the younger age-brackets. The same holds true for even the year-on-year comparison.

Jobs for middle-aged farmers is not the best form of jobs to be created in an economy with a young working age population bulge, but those are the kinds of jobs that were created in India in July 2019.

In July 2019, the count of the unemployed who were willing to work and were also actively looking for jobs was 32.9 million. This is lower than the peak count of unemployed recorded in the previous month, at 34.4 million. This decline was entirely in rural India. There was a small, 1.6 per cent increase in the urban unemployed during July.

Urban unemployment rate, at 8.6 per cent was very close to its recent peak value. In rural India, in spite of the increase in employment and the fall in the unemployment rate compared to the earlier month, it was still high at 7 per cent in July 2019.

The overall unemployment rate in July 2019 is 7.5 per cent. This is lower than the 7.9 per cent rate recorded in June 2019. Nevertheless, a 7.5-7.9 unemployment rate is high by any standard. Further, the unemployment rate computed by CMIE always excludes those people who are unemployed, are willing to work but are not actively looking for work. If we include this category as is done in the official statistics, then the unemployment rate (CMIE calls it the Greater Unemployment Rate) works out to 10.6 per cent in June and 10.2 per cent in July 2019.

Therefore, despite the growth in employment in July 2019, the unemployment rate is still quite high. And, the employment rate is very low.

The employment rate is perhaps, the most important labour markets statistic. An increase in this indicates that a greater proportion of the working age population is employed. In July 2019, only 39.8 per cent of the working age population was employed. This rate continues to remain on a negatively sloping gradient. In 10 of the last 12 months this ratio was less than 40 per cent.

The increase in employment in July has not helped much in pulling up the employment rate. It is still lower than it was four months ago, in March 2019. The increase in employment in July was not of a quality, which is neither sustainable nor desirable but it was also insufficient.