Sep 2019 was arguably the best month for Indian labour markets in 3 years

The month of September 2019 was arguably the best month for the labour markets in India in almost three years. Labour participation increased, employment increased sharply, the employment rate increased and the unemployment rate fell significantly. And, these improvements were across rural and urban regions, albeit very unevenly.

The estimated number of people employed shot up to nearly 410 million in September 2019. This was nearly 7 million more than the 403 million that were employed in August. It was also nearly 7 million higher than it was a year ago. Month-on-month estimates can be volatile and so, the 7 million increase could be partly statistical noise. Yet, it is large enough to believe that there was a substantial pick-up in employment during September 2019.

The labour force increased from 439 million in August 2019 to 441 million in September 2019. A year ago, the labour force was 431 million. These are big increases, bigger than the projected increase in the working-age population during the same period.

The labour force participation rate increased from 43 per cent in August to 43.2 per cent in September. More significantly, the employment rate increased from 39.5 per cent to 40.1 per cent during this period.

The employment rate is perhaps, the single most important number in the slew of fast-frequency labour market indicators. It is the share of the working-age population that is employed. India's challenge on the employment front is best captured by this metric. The employment rate has been falling almost steadily for a long time. This implies that an increasingly smaller proportion of the population that could be employed is actually harnessed for the purpose. As a result, even after the increase in the employment rate in September 2019, it is lower than the 40.3 per cent level it was a year ago and 41.6 per cent it was two years ago.

Similarly, good progress was made on the unemployment rate front, which fell from a high of 8.2 per cent in August to 7.2 per cent in September. However, the unemployment rate is higher than the 6.5 per cent level it was at a year ago.

While the labour market metrics improved in rural and urban areas, the robust increases reflect largely the big strides made in rural India.

Employment in rural India shot up by 6 million in September 2019 -- from 276 million in August to 282 million. Note that the all-India increase in employment during the month was 7 million. It follows that a predominant increase in employment in September came from rural India.

Rural employment can be seasonal. Monthly time-series of the data is too short to ease out the seasonal component of this increase. But, a partial explanation for this sharp increase could be the seasonal monsoon effect. It could be that the delayed monsoon increased agricultural activities sharply during September and this showed up as increased employment in rural India.

If the increase is largely seasonal and associated with the monsoon and kharif crop related activities then this may not be a sustainable increase. This will become clear only as the data for the coming months become available.

Labour participation in rural India increased from 44.1 per cent in August to 44.3 per cent in September. Such small increases can make a substantial difference. For example, this 20 basis point increase in the labour participation rate in rural India led to an increase of 1.8 million into the labour force.

Note that while the labour force increased by 1.8 million, employment increased by 6 million. This implies a reduction in the unemployed. The count of the unemployed in fact, did fall by over 4 million in September.

The rural labour force crossed 300 million in September 2019. Of these, 282 million were employed. And 18 million were unemployed. Another 7 million were willing to work but were not actively looking for jobs and so were not counted as unemployed.

Urban India saw very modest increases. Labour force increased by 0.4 million, employment increased by 0.5 million and the unemployed declined by 0.1 million in September 2019 compared to the estimates of August 2019.

Point to point comparisons with estimates of a year ago show the labour force expanded from 137 million to 141 million but employment remained stable at 127 million. And the entire increase in the labour force showed up in 4 million increase in the unemployed.

The small improvements seen in urban labour statistics in reality only mean that in September 2019, urban labour market conditions did not deteriorate any further. The unemployment rate is still high at 9.6 per cent and the employment rate is still low at a mere 37 per cent.

As of September 2019, there were 13.6 million unemployed in urban India. 35 per cent of these were graduates or post-graduates. The count of urban graduates who are unemployed is rising steadily but, the count of urban graduates who are employed is declining gradually. This is the graduate's challenge.