Unemployment, Narrowing Gender gap, Rural Wages and more...
This Week In Data #76
In this edition of This Week In Data, we discuss:
India’s urban unemployment rate was stable despite rising labour force participation
Labour force participation rate for women continues to rise more than that for men
Rural wage growth is moderating
CPI Inflation falls but is most likely temporary
The unemployment rate in urban areas was largely unchanged at 6.7% during the June quarter compared to both the preceding quarter and the year-ago quarter. This is true for both males and females. The unemployment for the young (age group 15-29) has fallen by 80bps over the past year. Note that the unemployment rate in this age group generally tends to be higher than the overall unemployment rate due to a higher prevalence of ‘frictional unemployment’.
That said, the big picture is of a fairly strong labour market. The labour force participation rate has continued to rise and has remained above 50% for the second consecutive quarter. This means more people are joining the workforce. And since the unemployment rate has remained static despite this means that more people are now working than before. Accordingly, the worker population ratio rose by over 1ppt on a YoY basis for the 9th consecutive quarter.
While there remains a large gap between the number of women and men working, that gap is (gradually) narrowing. This June quarter was the 8th consecutive quarter when the worker population ratio for females rose more than that for males. The pandemic seems to have been one of the key enablers for more female employment. Compared to June 2019 for instance, while the worker population ratio for males has increased by 3ppt, that for females has increased by 6ppt. There is still a long way to go though as the gap remains wide – while 70% of the males were working during the June quarter, just 23% of the women were.
Another positive urban labour market signal is the growth in the Naukri Jobspeak Index which tracks the job postings on the Naukri website. This indicator grew 11% YoY in July, the first time it has seen growth after several months of consistent decline. This indicator though tracks only formal white-collared jobs, so is much narrower in focus.
On the rural side though, the data is a bit mixed. Rural wage growth has been decelerating in the last few months. In June, average wages for men grew just 5% YoY, the slowest growth in almost 2 years. Rural women have generally been seeing stronger wage growth in recent months, but the trend even there is downwards. In June, average wages for rural women grew by 7.5% YoY, the slowest growth in a year.
Similarly, the work provided under NREGA has also been declining by almost 30% for the past 2 months. So this has also been a drag on rural incomes in recent months.
CPI Inflation fell sharply in July – from 5.1% in June to 3.5% in July. This is the lowest CPI print in the last few years and more importantly at 3.5% CPI is below the RBI’s target of 4%. That said, this decline is almost certainly temporary.
Last year July saw a big spike in Vegetable prices, specifically Tomatoes. This year also, sequentially Vegetable prices have risen but the increase has been far lower than last year. Consequently, on a YoY basis, the food inflation fell from 8.4% in June to 5.1% in July. Vegetable prices tend to be fairly volatile and this volatility often distorts the reported inflation data. So during periods of sharp movements in vegetable prices, it is best to look at inflation excluding Vegetables. And in July CPI ex Vegetables declined 20bps to 3.3% YoY. So, the underlying inflation trajectory improved, but nowhere as dramatically as the headline data suggests.
But in any case, as we have been highlighting before, from a monetary policy perspective, the current focus is on economic growth and the high credit growth in some categories, and not so much on inflation. Inflation will start to matter when it starts to rise and that does not seem likely to happen anytime soon.
That’s it for this week. Have a good weekend!