Labour force shrinks in September

by Mahesh Vyas

During September 2020, employment increased and unemployment declined compared to the status in August 2020. Employment increased by 5.1 million from 392.5 million to 397.6 million. Unemployment declined by 7.3 million from 35.7 million to 28.4 million.

The bigger fall in unemployed compared to the rise in the employed indicates that while many hitherto unemployed persons did find jobs, others exited the labour market without finding jobs. As a result, the labour force shrank by 2.2 million from 428.3 million in August to 426 million in September. A large shrinking of the labour force is a sign of discouraged workers.

At 426 million in September 2020, the labour force was nearly 11-12 million short of its level a year ago and also against the average size of the labour force in 2019-20.

This was a somewhat strange phenomenon that unfolded itself in September, of an increase in employment and a simultaneous fall in the labour force. A rural-urban disaggregation of the data provides an insight into what was happening in the labour markets. The two regions have very different stories to tell.

In rural India, employment increased handsomely by 7.4 million and unemployment declined by a little over 5 million. As a result, while the all-India labour force declined, the rural labour force increased by 2.3 million. This simultaneous increase in employment and the labour force indicates continued growth in economic activities in rural India in September.

In fact, the employment level in rural India in September was similar to the average employment in rural India in 2019-20 and almost similar to the employment level a year ago, in September 2019.

In sharp contrast to the apparent increased economic activities in the hinterlands, urban India saw a shrinking of its labour force and employment - evidence of an apparent shrinking of economic activities. Employment declined by 2.3 million and unemployment also declined by 2.3 million. As a result, the labour force was reduced by 4.6 million in towns and cities in September. These are big falls. The monthly fall in the labour force is 3.3 per cent. Save for the meltdown month of April 2020, the urban labour force has never shrunk so much in a month.

This sharp fall in the urban labour force eclipses the satisfaction of an overall rise in employment in September 2020.

There are other reasons why we should hold back our celebration of the 5.1 million rise in employment in September. This is because the big increase of 7.4 million jobs in rural India does not inspire confidence in terms of their quality.

The increase in rural employment is concentrated in those with an education level of between sixth and ninth grade. While on a net basis, a total of 7.4 million additional rural jobs were added in September, 8.1 million job additions were among those with less than high school education in rural India. These are not the best jobs.

Of the 7.4 million rural jobs added, 4.2 million were among women. While this is apparently good, prima facie, these do not appear to be good quality jobs. There was a surge in employment in the form of daily wage earners. Their numbers increased by 13.7 million in rural regions in September compared to August.

The increase in rural jobs was mostly among women, mostly among those with less than high school education and mostly for daily wage earners. This is a poor characterisation of the surge in rural jobs. Jobs increased the most in the age bracket 30 to 34 years.

A redeeming factor is the increase in jobs for graduates in urban India. These grew by 2.1 million. Another welcome change seen in the September labour data from Consumer Pyramids Household Survey is the increase in salaried jobs. These increased by 4.4 million. Quaintly, their growth was mostly in rural India, which saw a 3.2 million increase in these.

The 5.1 million increase in employment in September indicates a continuation of the recovery of jobs since their precipitous fall in April. Total employment in September 2020 was 397.6 million. This was 5.8 million short of the average 403.5 million employment in 2019-20.

The distribution of this deficit is very skewed. All the deficit is in salaried jobs. These are 16.5 million short of their level in 2019-20. These losses are partly offset by a gain of 7.3 million in farming and 3.1 million in daily wage earners.

Labour data for September are comforting in the sense that they belie fears of the recovery in employment seen since May, stalling or even reversing as the weekly data did suggest initially. However, the quality of recovery in jobs leaves much to be desired.

Equally worrisome is the shrinking of the labour force in September. The labour participation rate at 40.7 per cent during the month is still a 200 basis points lower than it was in 2019-20. And, after five months of recovery, the employment rate is still 144 basis points lower than it was in 2019-20.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
6.8 +1.3
Consumer Sentiments Index
Base September-December 2015
50.0 0.0
Consumer Expectations Index
Base September-December 2015
51.9 0.0
Current Economic Conditions Index
Base September-December 2015
47.1 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Dec 19 Mar 20 Jun 20 Sep 20
New projects 5.55 3.95 0.71 0.68
Completed projects 1.66 1.75 0.24 0.64
Stalled projects 0.61 0.77 0.11 0.08
Revived projects 0.83 0.42 0.68 0.34
Implementation stalled projects 0.13 9.78 0.09 0.03
Updated on: 21 Oct 2020 8:28PM
Quarterly Financials of Listed Companies
(% change) Dec 19 Mar 20 Jun 20 Sep 20
All listed Companies
 Income -1.7 -4.9 -27.9 4.1
 Expenses -2.2 -1.8 -28.3 1.2
 Net profit -10.8 -47.3 -38.4 9.0
 PAT margin (%) 5.1 2.4 5.5 17.5
 Count of Cos. 4,435 4,264 4,155 138
Non-financial Companies
 Income -5.5 -8.9 -38.0 3.6
 Expenses -6.4 -4.9 -38.2 -0.5
 Net profit -13.9 -48.2 -57.2 10.8
 PAT margin (%) 5.7 3.4 4.4 18.1
 Net fixed assets 13.3 31.9
 Current assets 3.0 4.2
 Current liabilities 4.9 -1.2
 Borrowings 14.7 14.8
 Reserves & surplus 2.1 18.6
 Count of Cos. 3,311 3,216 3,134 101
Numbers are net of P&E
Updated on: 21 Oct 2020 8:28PM
Annual Financials of All Companies
(% change) FY18 FY19 FY20
All Companies
 Income 8.4 13.3 0.6
 Expenses 9.9 13.5 1.2
 Net profit -40.4 22.3 -19.0
 PAT margin (%) 2.0 2.4 4.4
 Assets 10.9 9.3 9.4
 Net worth 7.5 8.6 5.0
 RONW (%) 3.5 4.3 6.1
 Count of Cos. 27,922 27,039 4,480
Non-financial Companies
 Income 8.6 13.8 -2.8
 Expenses 8.8 14.0 -1.6
 Net profit -9.0 23.5 -28.4
 PAT margin (%) 2.7 3.2 4.7
 Net fixed assets 7.2 5.4 13.8
 Net worth 6.1 8.5 1.9
 RONW (%) 5.7 6.9 7.6
 Debt / Equity (times) 1.0 0.9 0.7
 Interest cover (times) 2.1 2.4 2.9
 Net working capital cycle (days) 77 70 56
 Count of Cos. 22,629 21,863 3,354
Numbers are net of P&E
Updated on: 20 Oct 2020 9:02AM