The treacherous labour statistics

The unemployment rate fell in January 2022. It was a significant fall of 1.3 percentage points — from a rather menacing 7.9 per cent in December 2021 to a somewhat meeker 6.6 per cent in January 2022. The number of unemployed people fell by a hefty 6.6 mi­l­­lion. This sounds very good. But, there is a twist. The fall in the unemployment rate did not arise out of more people getting jobs. The 6.6 million drop in the count of unemployed does not mean that 6.6 million more jobs were created to employ them. They, rather disappointingly, just stopped looking for jobs. As a result, they were no longer counted as unemployed. They were out of the labour force and, therefore, did not count in the measurement of the unemployment rate.

Employment did not exp­and to absorb the unemplo­yed in January. On the contr­ary, it shrank by 3.3 million. The employment rate, which is the most important indicator in labour statistics, fell in January — to 37.6 per cent from 37.2 per cent in Dec­em­ber. The labour force participation rate fell from 40.9 per cent in December 2021 to 39.9 per cent in January 2022. These two ratios show the real stress in the labour markets in January. The unemployment rate fails to reflect this st­ress. This is a perfect examp­le of why the unemploym­ent rate is not a very reliable me­­asure of labour market stress.

There is some more twist in the data and it shows that January was not too bad a month on the employment front in spite of the loss of employment. The composition of employment improved for the better in terms of the nature of occupation and the industry distribution.

First, we look at the big takeaway from the nature of occupation. Employment among the salaried increased by a substantial 5.7 million in January, and that among daily-wage labourers and small traders declined by an almost similar number. Employment in salaried jobs reached nearly 83 million in January after having remained at 77 million in November and December 2021. Earlier, in September and Oct­ober, it was at 84 million and in 2019-20, at 86 million. Salaried jobs are not on a declining trend anymore. They seem to oscillate around 80 million, which is still well below the pre-pandemic level.

Labour seems to have moved out of agriculture as the rabi crop sowing season was winding up in Ja­n­uary. Most of the rabi sowing happens in Nov­em­ber and December. Only about ten per cent of the rabi crop is sown in January. The agricultural sector is, therefore, expected to shed labour in January. It did shed 2.5 million jobs.

While agriculture shed jobs, industry absorbed 5.8 million in January, and services shed 6.6 million. These are big numbers. They suggest a substantial churn in the labour markets during the month.

Photo: Reuters

Labour moved out of agriculture and also from poor quality jobs in the services sectors. Industry is where they moved in. Prima facie, it appears that the movement in January was from low productivity jobs to somewhat better jobs. Within agriculture, jobs shifted from crop cultivation to allied agricultural activities. Within services, jobs shrank in the personal non-professional services category and increased in financial services. Within industry, jobs increased in manufacturing, utilities and mines and also in construction.

Manufacturing added 1.8 million jobs. This was the second consecutive month of manufacturing ad­ding jobs. It added 1.4 million in December. This was a 4.8 per cent increase in the month. The recently re­leased Index of Industrial Production for the month shows a 7.7 per cent increase in industrial production. In the past there was some seaso­nal increase in manufacturing output in December. We see a sustained increase in employment in manu­f­acturing in January as well, when it reached 32 million. This is the highest since March 2020.

However, employment in manufacturing is still quite low compared to the 41 million that this sector employed in 2019-20. Reaching the 41-million mark seems extremely difficult because this would require massive investments to create new capacities, and the conditions are not conducive for that around now.

Mines and utilities added over 1.2 million jobs in January.

The construction industry added 2.8 million jobs in Jan­uary, when employment in the industry reached 67.5 million. This is high compared to the 61 million it absorbed bef­ore the pandemic in 2019-20. While the lockdown had knoc­ked out half of the employment from this sector, a relaxation of mobility restrictions brought the jobs back quickly. The informal nature of employment in this industry makes it possible to hire and fire most of the labour easily in response to external shocks. Since September 2020, the construction industry has been absorbing 60-70 million. On an average, the industry absorbs more labour now than it did before the pandemic.

The services sector shed jobs in the personal non-professional category. These are mostly people providing services of house-help, cooks, gardeners and an assortment of personal services to households.

The shift in the composition of employment in January in favour of better quality jobs is encouraging. However, the quantum of employment was disappointing. Fast frequency data for the first two weeks of February suggests that the quantum of employment continues to remain a challenge. During the weeks ended February 6 and 13, the employment rate was 36.4 per cent and 36.6 per cent, respectively. These compare poorly with the already low emp­loyment rate of 37.6 per cent in January 2022.

 

The writer is MD & CEO, CMIE P Ltd