Job losses mount in April

April 2021 turned out to be worse than expectations. We had expected labour participation rate to stabilise at its March 2021 level. The LPR had dropped sharply in March already after a modest fall in February. But, the LPR fell for a third consecutive month in April. It fell to 39.98 per cent. This is the lowest LPR since May 2020, the month of a stringent nation-wide lockdown. The LPR in April 2021 is therefore the worst since the national lockdown. Perhaps, this fall is the result of the local lockdowns in several states. For example, in Maharashtra, a state that imposed partial lockdowns saw its LPR fall sharply from 44.2 per cent in March to 40.6 per cent in April.

The labour force shrank by 1.1 million in April 2021 to 424.6 million compared to 425.8 million in March. In spite of this smaller labour force looking for employment, a greater proportion failed to find employment. As a result, the unemployment rate shot up from 6.5 per cent in March to 8 per cent in April.

The employment rate fell from 37.6 per cent in March to 36.8 per cent in April.

The lockdowns could have denied people from seeking employment and caused a fall in labour participation. But, the economy also could not provide adequate jobs to those who sought jobs. So, the strain in the labour markets was not entirely because of the partial lockdowns. It was largely because the economy simply could not provide employment to large numbers who sought work.

While the labour force shrank by 1.1 million in April, the count of the employed fell by a much larger 7.35 million. This fell from 398.15 million in March to 390.79 million in April. Loss of employment during April is likely to have dejected more than a million workers sufficiently to force them to quit the labour force, at least temporarily. Count of the unemployed who were willing to work and were actively looking for work but unable to find any expanded by 6.2 million from 27.7 million in March to 33.9 million in April.

People who left the labour markets in dejection did not leave the markets entirely. They remained at the periphery as unemployed labour that was willing to work if work became available although they were not actively looking for work. This set, of unemployed people who were willing to work but were not actively looking for work swelled from 16.1 million in March to 19.4 million in April.

While the fall in the LPR could be attributed to the partial lockdowns, the fall in employment cannot be attributed to the lockdowns. Most of the job losses are from the agricultural sector, which is not impacted by the lockdowns. Of the 7.35 million people who lost employment in April, 6 million losses were from the agricultural sector. April is a lean month for employment in the farms. The rabi crop is harvested by then and preparations for the kharif crop usually begin only in May. Agriculture employed 120 million in March. This dropped to 114 million in April.

Daily wage labourers and small traders saw a loss of employment of the order of 0.6 million in April. Some of these agricultural and daily wage labourers may have found work in the construction industry as this saw an increase of 2.4 million jobs during April. But, most of the 6.6 million released from agriculture and daily wagers could have been left unemployed during the month.

Salaried employees saw a loss of 3.4 million jobs in April. This was the third consecutive month of a decline in coveted employment category. During these three months, the total loss of salaried jobs was a substantial 8.6 million. The cumulative loss of salaried jobs since the pandemic is even larger at 12.6 million. During 2019-20, there were 85.9 million salaried jobs. As of April 2021, there were just 73.3 million.

Salaried job losses were disproportionately located in rural India. While urban salaried jobs accounted for 58 per cent of total salaried jobs in 2019-20, they accounted for only 32 per cent of the job losses till April 2021. Rural salaried jobs that accounted for 42 per cent of the total on the other hand accounted for 68 per cent of losses.

This disproportionate share of rural salaried jobs in the losses indicates that the damage is mostly among the medium and small scale industries that are located predominantly in rural India.

Prospects for jobs look bleak during 2021-22. The second wave of Covid-19 has stalled economic recovery. Professional forecasting agencies have been scaling back their projections for the year. New investments that could create jobs in large numbers are unlikely to be made during the year. Capacity utilisation was low at around 66.6 per cent as RBI’s OBICUS. This is unlikely to have improved since then. The government may be required to provide support under the Mahatma Gandhi National Rural Employment Guarantee once again this year to absorb some of the stress on livelihoods. In April 2021, 301 million persons were provided jobs under the scheme. This is more than twice the employment provided under the scheme in April 2020.