Unemployment rate rises in April

CMIE released data on India’s labour markets for April 2023 on Monday, May 1. Employment and unemployment increased in April compared to earlier months.

India’s unemployment rate increased in April to 8.11 per cent from 7.8 per cent in March 2023. The unemployment rate has been on an upward trend since the start of the year, recording an increase for the fourth consecutive month. It was 7.14 per cent in January 2023. Compared to this, the unemployment rate in April is 0.97 percentage points higher. Over the past 12 months, the unemployment rate ranged between 6.4 per cent and 8.3 per cent, averaging at 7.6 per cent. Therefore, the unemployment rate of 8.11 per cent registered in April is on the higher end of the spectrum.

This rise in unemployment rate was expected, as the weekly data for April recorded higher levels of unemployment rate compared to March. The unemployment rate breached the 7.8 per cent recorded in the month prior, in each of the four weeks of April. The average was close to 8.27 per cent. The lower-than-expected unemployment rate in April comes as a small respite.

The unemployment rate increased owing to a rise in the labour participation rate (LPR). The labour participation rate inched up from 39.77 per cent in March to 41.98 per cent in April 2023. This is the highest LPR recorded in the past three years. In each of the months post-March 2020, when LPR was 41.9 per cent, the rate was restricted to below 41 per cent. The significant rise in LPR in April, therefore, is surprising. The labour force expanded substantially, by 25.5 million, to 467.6 million in April. This big jump in the number of people who entered the labour force points at a possible increase in optimism about finding employment.

Out of the people who entered the labour force this month, close to 87 per cent were able to secure jobs, while a smaller proportion was left without work. The number of unemployed persons in the country rose from 34.5 million in March to 37.9 million in April. Around 3.4 million additional people became unemployed.

There was a significant improvement in employment in India, with an addition of close to 22.1 million jobs. The size of the workforce increased to 429.7 million in April, compared to 407.6 million in the previous month. As a result, the employment rate in the country also inched up by 1.91 percentage points, to 38.57 per cent in April. Similar to the LPR, the employment rate in April is the highest recorded since March 2020. The employment rates for all months between March 2020 and 2022 lingered below 38 per cent.

The notable rise in LPR and employment rate in India in the month of April reflects an increase in willingness among people to seek employment. A large proportion of the people who joined the labour force in this month were also able to find jobs. Furthermore, the increase in labour participation was significantly higher in rural India compared to urban India. Most of the jobs added in April were in rural India.

Around 20.3 million people entered the labour force in April in rural India, resulting in a total of 321.2 million persons in the rural labour force. The rural LPR increased by close to 2.7 percentage points, to 43.64 per cent in April. The happy outcome is that while 1.1 million of those who entered the labour force in search of employment joined the ranks of the unemployed, a much higher number of 19.2 million were able to find jobs in rural India. As a consequence, the rural employment rate peaked at 40.4 per cent in April from 37.9 per cent in March. This employment rate in rural India is the highest witnessed in the past three years. Correspondingly, the unemployment rate in rural India inched down from 7.47 per cent in March to 7.34 per cent in April.

On the other hand, the urban unemployment rate increased to 9.8 per cent, compared to 8.5 per cent in the previous month. This was mainly due to a rise in the LPR in April to 38.75 per cent. It was 1.3 percentage points lower in March. This translates to an expansion of the urban labour force from 141.2 million to 146.4 million in this period. Out of the 5.2 million additional people in the labour force in April who were willing to work, 2.84 million were able to secure employment. Over 2.3 million additional people became unemployed in April in urban India.

Overall, headline metrics for the month of April suggest that the rural labour market fared well compared to the urban labour market in India. A much larger proportion of the increased labour force in rural India gained employment compared to urban India. Around 94.6 per cent of the people who joined the rural labour force became employed. As opposed to this, only 54.8 per cent of the people who entered the labour force in urban India were able to find jobs.