Labour markets' weak June recovery

by Mahesh Vyas

As Covid-19 cases declined and mobility restrictions eased in June 2021, labour markets recovered much though not all of the losses suffered in May 2021. Job losses suffered in April and even earlier since January 2021 continue to remain uncovered. The recovery in June notwithstanding, job losses compared to January 2021 were of the order of 17 million. Compared to 2019-20, the loss is a substantial 26 million. Covering such large gaps could take months if the June 2021 recovery is sustained.

The unemployment rate declined in June 2021 to 9.2 per cent. This was a good 2.7 percentage points lower than the level in May which was 11.9 per cent. The unemployment rate in June was, however, high enough to continue to discourage labour from participating fully in the labour markets. This is evident in the fall seen in the labour participation rate in June to 39.6 per cent compared to 40 per cent in May. The substantially lower unemployment rate in June compared to May, however, did help in improving the employment rate which climbed to 35.9 per cent compared to 35.3 per cent in May.

The improvement in the employment rate in June translates into an increase in employment in absolute terms. Employment increased from nearly 375 million in May to 383 million in June 2021 an addition of 7.8 million jobs. This is a substantial expansion, but, it is still a very partial recovery. First, it is a recovery of only half the 15.3 million jobs lost during the month of May. Second, May itself had seen a fall of 7.4 million over April. If we consider the second wave of Covid-19 to have begun in April 2021 then the fall incurred during this wave was of the order of 22.7 million. Of this, 7.4 million jobs were lost in April and 15.3 million in May. June recovered just about a third of this cumulative fall.

Like in the first wave of Covid-19 lockdowns, the biggest hit in employment in the second wave (April and May 2021) was among the small traders and daily wage labourers. They suffered a loss of 17.2 million jobs during April and May of 2021. Salaried employees lost 3.2 million jobs and business persons lost another 5.7 million. Agriculture absorbed 3.4 million of these losses.

The 7.8 million jobs that repaired in June 2021 were essentially in urban India and, most were of salaried employees from urban India. The total increase in salaried jobs during June 2021 was 6.2 million of which, 4.5 million were from urban India. Retail trade, textiles and construction were the three big sources of additional jobs in urban India. The largest increase in employment in June was in retail trade. The total increase in employment in this sector was a massive 11.2 million. Of this, 7.5 million was in rural India and 3.7 million in urban India. Much of the gain in retail trade in rural India was offset by fall in employment in other sectors including agriculture. The agricultural sector saw a huge shift in rural labour from allied agricultural activities, plantations, etc. to crop cultivation. But, on a net basis, agriculture absorbed less labour in June compared to May. The construction industry added 2.2 million jobs and the textiles industry added 2.1 million jobs in June compared to May.

The traction in non-farm jobs particularly manufacturing industries such as textiles, in June is encouraging. Employment in the manufacturing sector as a whole increased by 3.7 million in June compared to May. Services sector, reflecting the sharp increase in retail trade also shows a sharp increase of 6.9 million. The fall in employment for a change, was in agriculture in spite of June being a busy month for kharif sowing. But, agriculture has accumulated excess labour since July 2020 and it has been slowly shedding some of this. The reduction in June could reflect this gradual reduction in agricultural labour as employment in other sectors improved.

While the improvement in employment in June and in particular the increase in non-farm employment in the month is promising, the employment recovery challenge is steep because of a huge backlog.

Employment has been gradually declining since January 2021, i.e. even before the second wave of Covid-19 hit India. Employment in March 2021 was 2.6 million less than it was in January 2021. The second Covid-19 wave added a loss of another 22.7 million. As a result, even after the gain of 7.8 million in June, the employment level in June 2021 is still a substantial 17.4 million short of the 401 million jobs estimated for January 2021.

The unemployment rate is still quite high at over 9 per cent and the employment rate is low at less than 36 per cent. In comparison, in 2019-20 the pre-Covid year, the unemployment rate was 7.5 per cent and the employment rate was 39.5 per cent. Similarly, the employment

Evidently, labour markets have not yet recovered from the Covid-19 induced economic shock. All parameters employment, employment rate, unemployment rate, and the labour participation rate are worse than they were in 2019-20 or even in the lockdowns-hit 2020-21.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.5 -1.4
Consumer Sentiments Index
Base September-December 2015
57.8 +0.3
Consumer Expectations Index
Base September-December 2015
60.1 +0.5
Current Economic Conditions Index
Base September-December 2015
54.3 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Sep 20 Dec 20 Mar 21 Jun 21
New projects 2.53 1.42 2.11 2.72
Completed projects 0.77 0.86 1.15 0.70
Stalled projects 0.08 0.31 0.26 0.32
Revived projects 0.27 0.15 0.22 0.12
Implementation stalled projects 0.09 0.20 0.32 0.25
Updated on: 19 Sep 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Sep 20 Dec 20 Mar 21 Jun 21
All listed Companies
 Income -6.3 1.6 14.9 42.2
 Expenses -10.3 0.1 7.2 42.2
 Net profit 47.9 58.1 325.4 128.6
 PAT margin (%) 8.4 8.4 8.9 9.1
 Count of Cos. 4,429 4,449 4,351 4,316
Non-financial Companies
 Income -10.5 0.2 17.5 61.1
 Expenses -14.2 -0.8 10.3 62.9
 Net profit 31.8 54.6 233.6 184.7
 PAT margin (%) 8.1 8.8 9.1 8.6
 Net fixed assets 5.9 2.3
 Current assets 0.8 4.6
 Current liabilities -1.8 0.7
 Borrowings 8.5 -4.2
 Reserves & surplus 3.7 12.0
 Count of Cos. 3,282 3,303 3,248 3,233
Numbers are net of P&E
Updated on: 19 Sep 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.2 -0.4
 Expenses 13.6 0.1 -2.9
 Net profit 15.2 -10.4 48.3
 PAT margin (%) 2.1 2.1 7.6
 Assets 9.8 8.5 13.9
 Net worth 8.5 4.4 16.0
 RONW (%) 3.8 3.5 9.5
 Count of Cos. 31,664 30,513 3,698
Non-financial Companies
 Income 14.0 -1.7 -3.0
 Expenses 14.2 -1.4 -4.8
 Net profit 21.4 -21.2 30.9
 PAT margin (%) 2.9 2.3 7.3
 Net fixed assets 5.6 10.0 3.4
 Net worth 7.9 2.1 14.4
 RONW (%) 6.4 4.9 11.0
 Debt / Equity (times) 1.0 1.1 0.5
 Interest cover (times) 2.3 1.9 4.6
 Net working capital cycle (days) 74 81 59
 Count of Cos. 25,365 24,409 2,691
Numbers are net of P&E
Updated on: 12 Sep 2021 7:10PM