Superman statistics: Employment either not rising or not rising adequately

In India, a household survey is a lot more important and relevant than a payrolls database because it includes the employment and unemployment conditions in both, organised and unorganised sectors

So, what was that payrolls database episode all about? Will we get a payrolls database rolling sometime soon or was all that ballyhoo only for entertainment - some kind of background score of a comedy? Or was it purported to be a surgical strike against the growing narrative of no jobs? Sure, payrolls are a great source and granted that big data is a big deal but when will we see the real stuff?

I'd believe that the prime minister, the finance minister and the NITI Aayog are all satisfied with the work of the famous Ghosh duo. If the work of academics done under the supervision or at the behest of the government's premier think tank is accepted by the very top echelons of government then it is logical to expect that estimates based on this seminal work be published pronto.

Simultaneously, accepted norms of intellectual integrity of public institutions require that the Ghosh duo may now publish a proper paper like academics are expected to do. It is now apparent that this was not an academic pursuit but it is work commissioned by NITI Aayog. If this is indeed the case, then NITI Aayog needs to produce an official document on the methodology and the way forward. Let's move on to producing regular estimates based on well-documented methodologies. That would be progress.

Here is an example of what the US produces from its household survey and its establishment survey data (the latter is, in fact, the payrolls database) -- https://www.bls.gov/news.release/empsit.nr0.htm

The US does not rubbish a household survey as proponents of a payrolls database in India seem to do. There is need for both. And, the Indian government is sensibly conducting its household survey on employment / unemployment.

In India, a household survey is a lot more important and a lot more relevant than a payrolls database because it includes the employment and unemployment conditions in both, the organised and the unorganised sectors. A payrolls database is necessarily limited to the non-farm organised sector only. Its scope is therefore, necessarily limited.

Nevertheless, a payrolls database is an invaluable source to understand the jobs situation in India.

We must distinguish between the need for the regular release of a payrolls database-anchored set of estimates and, the estimate put out by the Ghosh duo. Estimates based on a payrolls database are not only welcome they are a necessity for a rapidly growing economy and particularly if an economy is rapidly coming under the cover of the organised sector as suggested by the latest Economic Survey.

However, the estimate of 7 million new jobs being created in fiscal 2017-18, as suggested by the Ghosh duo, seems over the top. Here are three reasons why:

Ajit Ghose demonstrates in his elegant piece in this paper on February 12 that the projected benchmark of the jobs added in the formal sector should be of the order of 0.75 million in 2017-18. The 7 million estimate is simply way off the mark. If the 7 million estimate is true then either our understanding of the past was all wrong or the economy has changed dramatically but so surreptitiously that we did not even notice it.

The Sixth Round of the Quarterly Report on Employment Scenario in Selected Sectors published February 16, 2018 shows that 64,000 jobs were added during the first quarter of 2017-18. Of these, 61,000 were added in the formal sector and 3,000 jobs were added by the self-employed. If this is true then again something dramatic must be happening unknowingly in the remaining three quarters for the employment numbers in the organised sector to jump up by 7 million in the year.

According to the Consumer Pyramids Household Survey, the average monthly employment was 406.7 million during 2016-17. During the first ten months of 2017-18, the average monthly employment was 406.3 million. February and March are part of the slack season and it is likely that the employment numbers won't rise during this period. So, there is no indication of any increase in employment in the country as a whole in 2017-18. If the 7 million estimate of payroll jobs is true, then some dramatic shifts from unorganised sectors to the organised is happening sneakily. And then, we wouldn't know how to accommodate the several million jobs supposedly added through the Mudra scheme which are in the unorganised sector.

Evidently, logic and available data suggest that employment is not rising or, not rising adequately. So then, what about the payrolls database? Let's wait for the details and the real action to roll out. Till then, we will wonder -- was it an event? a surgical strike? or, a bird, a plane or a Superman doing good?

Methodology

Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.

The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.

The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.

All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.

The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.