Labour metrics flounder in February

by Mahesh Vyas

In February 2020, the unemployment rate was 7.8 per cent. This is higher than it was in January 2020, when the unemployment rate was 7.2 per cent.

During the four weeks of February, the unemployment rate was above 8 per cent for three weeks. It was 8.5 per cent in the first week, 8.1 in the second week and again in the fourth week. The rate fell to 7.4 per cent in the third week, which pulled down the average for the month to 7.8 per cent.

The unemployment rate has risen in 2019-20. The average rate for the first 11 months, April through February was 7.5 per cent. This is much higher than the 6.3 per cent average recorded during the same months of 2018-19.

While the unemployment rate has risen during the current year, it stopped rising after it touched 8 per cent in the middle of the year. The rate seems to have come off a peak of 8.2 per cent in August 2019 and slid down well below 7.5 per cent during November, December and January.

The 7.8 per cent unemployment rate recorded for February is therefore, higher than the recent average.

The unemployment rate rose in February because people lost jobs and swelled the ranks of the unemployed. The number of people estimated to be employed dropped rather sharply by 5.5 million from 411.3 million in January 2020 to 405.8 million in February 2020. During the same period, the number of persons unemployed and actively looking for jobs increased by 2.5 million, from 31.7 million to 34.2 million. Another half million added to the count of passively unemployed who were willing to work but were actively job hunting.

The remaining 3 million who lost jobs left the labour force and joined the count of those who were not interested in working. This is what is officially called as ’not in the labour force’. ’The not in labour force’ also increased because of the regular increase in the working age population.

Thus, during February, employment fell by 5.5 million, unemployed increased by 3 million and those not in the labour force increased by 5 million.

This is not a very nice report card for the month. But, a caveat is in order.

These monthly estimations are volatile. Changes in monthly estimates could reflect changes in the sample besides changes in the estimates themselves, such as the unemployment rate or the number of employed. A moving average of 4 months reflects the medium and short-term trends much better than the monthly estimates.

These moving averages tell us that in the past 2-3 years, the count of the labour force is not growing much but that of the people out of the labour force is growing rapidly. The labour force grew from a low of 420 million in mid-2017 to 440 million in the four months ending February 2020. The count of out-of-labour-force grew from 550 million to nearly 600 million in the same time. The growth in the labour force was 20 million while that in those out of labour force was 50 million.

Similarly, over the same time horizon, while the count of employed has stagnated at around 406 million, the count of the unemployed has doubled from about 17 million to 33 million.

In the shorter-run, the 4-month moving average suggests that the unemployment rate has stopped increasing and seems shy of crossing the 8 per cent mark. However, the increase in the unemployment rate in February 2020 was higher than the trend suggested and the weekly unemployment rates of the month suggest that it did remain higher than 8 per cent through most of the month. Nevertheless, the generally weak trend in the unemployment rate comes at a cost of low and falling labour participation rate. Recent trends suggest a weakening of the labour participation rate. The rate seems to have fallen decisively below 43 per cent. This is a bigger cause for concern than the likelihood of the unemployment rate breaching 8 per cent.

This combined effect of a relatively stable or tending-to-rise unemployment rate and a falling labour participation rate indicates that the employment rate is falling.

The employment rate fell rather sharply to 39.3 per cent in February 2020, from 39.9 per cent in January 2020. At this level, 39.28 per cent to be precise, it was just a whisker away from its lowest level, which was 39.24 per cent in November 2019. The employment rate is the summary indicator India should be looking at rather than the unemployment rate which is more relevant to a developed country. It is the percent of working age people who are employed. This is depressingly low and worryingly, it keeps falling.

Published in Business Standard Link

Unemployment Rate
Per cent
10.9 +0.5
Consumer Sentiments Index
Base September-December 2015
84.8 -2.4
Consumer Expectations Index
Base September-December 2015
85.6 -2.4
Current Economic Conditions Index
Base September-December 2015
86.9 -2.5
Quarterly CapEx Aggregates
(Rs.trillion) Jun 19 Sep 19 Dec 19 Mar 20
New projects 1.09 2.05 4.95 2.92
Completed projects 0.88 0.83 1.64 0.77
Stalled projects 0.13 0.41 0.60 0.49
Revived projects 0.29 0.52 0.83 0.41
Implementation stalled projects 0.98 0.85 0.15 1.13
Updated on: 08 Apr 2020 3:28PM
Quarterly Financials of Listed Companies
(% change) Mar 19 Jun 19 Sep 19 Dec 19
All listed Companies
 Income 8.5 4.7 -2.2 -1.7
 Expenses 5.4 2.7 -3.1 -2.2
 Net profit 213.1 17.4 -2.3 -10.3
 PAT margin (%) 3.6 6.2 5.3 5.2
 Count of Cos. 4,437 4,452 4,411 4,356
Non-financial Companies
 Income 8.0 2.4 -6.4 -5.4
 Expenses 7.7 1.7 -6.7 -6.3
 Net profit 1.6 -8.5 -14.9 -13.1
 PAT margin (%) 6.2 6.3 5.8 5.8
 Net fixed assets 5.6 10.4
 Current assets 13.2 4.6
 Current liabilities 7.3 4.8
 Borrowings 12.3 8.4
 Reserves & surplus 7.2 5.9
 Count of Cos. 3,322 3,339 3,314 3,267
Numbers are net of P&E
Updated on: 08 Apr 2020 3:28PM
Annual Financials of All Companies
(% change) FY17 FY18 FY19
All Companies
 Income 6.1 8.1 14.9
 Expenses 6.1 9.5 15.3
 Net profit 26.4 -40.2 20.5
 PAT margin (%) 3.3 2.1 3.2
 Assets 8.6 10.9 9.7
 Net worth 9.6 7.6 8.7
 RONW (%) 5.8 3.5 5.3
 Count of Cos. 27,650 25,093 15,291
Non-financial Companies
 Income 5.8 8.2 15.7
 Expenses 6.0 8.4 16.1
 Net profit 23.2 -9.1 19.5
 PAT margin (%) 2.9 2.8 4.1
 Net fixed assets 9.2 6.9 5.1
 Net worth 8.9 6.1 7.7
 RONW (%) 6.2 5.7 8.2
 Debt / Equity (times) 1.1 1.0 0.8
 Interest cover (times) 2.0 2.2 2.8
 Net working capital cycle (days) 84 76 55
 Count of Cos. 22,609 20,449 11,909
Numbers are net of P&E
Updated on: 05 Apr 2020 5:13PM