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Urban employment rate rises to 35.1% despite lockdowns in major cities: CMIE

Chitranjan Kumar     July 23, 2020

India's urban employment rate surged to 35.1 per cent in the week ended July 19, after a massive fall in April, according to Centre for Monitoring Indian Economy (CMIE). This happens to be highest employment rate after falling to 26.1 per cent in the week ended April 19, 2020.

The urban employment rate had peaked at 34.5 per cent in the week ended June 28, while it fell to 33.2 per cent in first week of July and remained thereabouts for another week before recovering back smartly to 35.1 per cent, as per CMIE's latest report.

"The recovery in the urban employment rate is surprising because news reports suggest that towns that were 'unlocked' recently have been brought under a lockdown again. This is true of Bangalore, Pune, Patna and Lucknow among others. But, in spite of these intermittent lockdowns and their relaxations the nature of the lockdown in recent times has changed. Many types of services have resumed with restrictions," CMIE said.

"Urban lockdown seems to be evolving in every town to find its own local equilibrium between loss of lives and loss of income. The net result is that slowly employment is returning," it added.As per the CMIE preliminary labour data for the first three weeks of July, there has been improvement in labour conditions during the current month. The labour participation rate has improved, albeit lower than as it was in June, while the unemployment rate has declined so far during the month.

The overall employment rate has continued its recovery in July with average employment rate rising to 37.5 per cent during the first three weeks of the month. The recovery fuels hopes but it is still a long way from the 39.2 per cent average in the first quarter of 2020. The 170 basis point difference between the two implies that employment is still around 18 million short of what it was a few months ago, the report said.

During the week ended July 19, labour participation rate (LPR) picked up to 41.7 per cent, higher than the 40.4 per cent registered during the preceding two weeks. The LPR had hit 42 per cent in the third week of June and then fell for three consecutive weeks.

During the week under review, the unemployment rate inched up to 7.9 per cent from 7.4 per cent in the previous week. The unemployment rate, however, was significantly lower than it was in all the earlier weeks of the lockdown.

"The big gain in labour participation rate and the small increase unemployment rate helped in delivering a handsome increase in the employment rate. This rose to 38.4 per cent in the week ended July 19," the report highlighted.

As per CMIE, India faces a serious challenge of gradually declining employment rate which has fallen from around 43 per cent in 2016 to less than 40 per cent in 2019. The average employment rate during the April-June quarter of 2020 stood at 39.2 per cent. In April 2020, the rate declined to 27.2 per cent and then recovered a bit in May to 29.2 per cent and then smartly in June to 35.9 per cent.

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