Jobs recovery eludes manufacturing sector

by Mahesh Vyas

CMIE released the sectoral breakup of employment derived from its Consumer Pyramids Household Survey in its Economic Outlook service late last week. These data are available at monthly and quarterly frequencies. We use the quarterly estimates here to understand the impact of the lockdown by broad sectors and industries.

Employment in agriculture had hovered between 140 million and 150 million since 2016 when the employment series from CPHS begins till the quarter ended June 2020. During the quarter ended June 2020, which was the first quarter of the lockdown and the one that experienced the most severe lockdown across the country, agriculture did not suffer any loss of employment. Employment during this quarter was on the contrary marginally higher than it was in the preceding quarter and also than the corresponding quarter a year ago.

Then, employment in agriculture shot up to a record 158 million during the quarter ended September 2020. Employment in agriculture peaked during July and August 2020 when it crossed 160 million. In the quarter of September 2020, employment in agriculture was a substantial 5.5 per cent higher than it was in the year-ago quarter.

The increase in employment in agriculture during the lockdown indicates both, shift in labour from shrinking employment opportunities in non-farm sectors and also, favourable agricultural conditions during the year. This excess labour flow into agriculture shows in the record area sown under the kharif crops of 2020. Acreage under kharif crops increased by 4.8 per cent.

Employment in agriculture declined to 154 million in the quarter ended December 2020 from the 158 million it employed during the previous quarter. Nevertheless, this was 3.5 per cent higher than its level in the year-ago quarter of December 2019.

Agriculture accounts for about 36 per cent of total employment in India. Its share rose from a steady 36 per cent between 2016 and 2019 to nearly 40 per cent in 2020. The services sector also averages at 36 per cent of total employment. But, its share has been rising from 33 per cent in 2016 to 38 per cent in 2018, 2019 and 2020.

Employment in the services sector increased from 140 million in early 2017 to 157 million by the quarter of March 2020. But, unlike agriculture, it took a hit in the lockdown. Employment fell to 128 million in the quarter of June 2020. It has recovered since then, but only partially. Employment was 146 million in the September 2020 quarter and then 148 million in the December quarter. It is still short of the levels of March 2020 or even a year ago. In fact, employment in the services sector is lower than it was in any quarter since 2018.

Retail trade, travel and tourism, education and personal non-professional services took the biggest hits on employment during the June 2020 quarter. Retail trade suffered the largest loss of jobs of 10 million followed by travel and tourism with a loss of 5.5 million jobs and education with a loss of 5.3 million jobs. Loss of jobs in the personal non-professional services was 2.5 million.

By the December 2020 quarter most of these services sector job losses had recovered, except education. Loss of jobs in the education sector continues to mount. In the quarter ended December 2020 these were of the order of 5.9 million jobs. Employment in the education industry had risen from 13-14 million in 2016 and 2017 to 15 million in 2018 and 2019. However, the sector started showing weakness towards the end of 2019. Employment fell to 14.5 million in the quarter of March 2020 before dropping precipitously to 9.7 million in the June 2020 and September 2020 quarters. In the December 2020 quarter employment in education was down to 9.1 million.

Interestingly, the recovery of jobs is complete in almost all other segments of the services sectors. Travel and tourism, which engaged 19.4 million in 2019-20, saw its employment fall by 5.5 million during the severe lockdown of the June 2020 quarter. However, in the December 2020 quarter, it employed 20.7 million, which is 1.3 million more than it did in 2019-20. Other services sectors have also seen an improvement. As a result, while the services sector saw a loss of 25.5 million jobs in the June 2020 quarter on a base of 154 million, job losses were down to 8.3 million in the September quarter and 5.5 million in the December 2020 quarter.

In contrast, recovery from job losses in the manufacturing sector has been modest. Manufacturing accounted for 40 million jobs in 2019-20. In the first quarter this dropped to 24.6 million, implying a loss of over 15 million manufacturing jobs. It recovered to 27.1 million in the second quarter and then to 28.8 million in the December quarter. The shortfall is still quite high at 11.4 million. More importantly, every major manufacturing industry, except pharmaceuticals, employed less people in all three quarters of 2020-21 compared to the employment in 2019-20.

The real estate and construction industry has seen a near-complete recovery in terms of employment. The industry employed an estimated 61 million persons in 2019-20. This fell to 28 million in the June 2020 quarter but had recovered almost all the 33 million job losses by the December 2020 quarter.

Evidently, jobs have moved from those sectors that have higher labour productivity such as manufacturing and also services to those with low productivity such as in agriculture and construction.