Covid-19 lockdown blues: Urban employment rises relentlessly; rate rises 270 bps to 17.41% in week ended May 23

Unemployment in urban areas is rising relentlessly. Joblessness in cities grew a sharp 270 basis points to 17.41% in the week ended May 23, signalling that the worse is yet to come. However, the jury is still out on whether the rate will rise to the highest level ever of 27.1% seen in the aftermath of last year’s lockdown.

Urban unemployment rate has soared nearly 1.5 times since the second wave of the pandemic started ravaging the country in April (see chart).

The economy’s inability to create jobs amidst lockdowns and restrictions on mobility have contributed to the rise in urban joblessness.

Overall unemployment rate has also significantly increased since the beginning of the second Covid wave to stand at near one-year high of 14.73% for the week ended May 23 against 8.16% on April 4. During the same period, rural unemployment rate rose to 13.52% from 8.58%, even though it softened a bit from 14.34% recorded in the week ended May 16.

“Urban regions face a double whammy of a fall in the labour participation rate and rise in unemployment rate. There seems to be a serious job crunch in the cities,” CMIE’s MD & CEO Mahesh Vyas said.

Ashwini Deshpande, director, Centre for Economic Data and Analysis (CEDA) at Ashoka University, said in recent times, virtually all of sectors have seen job losses in urban areas – daily wagers engaged in construction activities, small hawkers and traders, small enterprises, services like hospitality and entertainment etc. are among the worse affected.

“The lockdown over the last six weeks has resulted in a spike in unemployment, similar to one experienced during last year’s lockdown. Employment, which took a big hit during the first wave, had not fully recovered to pre-covid levels as the economy gradually unlocked in 2020. The second wave and the latest lockdown have resulted in further problems,” Deshpande said.

Labour market expert and XLRI professor KR Shyam Sundar said it was only expected that the spike in urban unemployment rate would shoot through the roof because of the clamping of lockdown and other curbs which greatly impeded trade and commerce, especially the sale of seasonal products, consumer durables, automobiles and even FMCG products. There has been a reduction in the construction activity also.

“But the worst is not over as yet. Urban unemployment will intensify further and unemployment which will not be captured by data on unemployment will be far higher. Widespread forced idleness is the unusual labour market outcome due to Covid pandemic which will have grave social implications,” Sundar warned.