The government has finally found a way to measure the statistical elephant of unemployment; however, it may be incomplete — much like the blind men who touched different parts of a pachyderm and mistook it for the whole truth.

The challenge in measuring the unemployment rate using the Current Weekly Status (CWS) approach — where a person’s activity status is determined based on the preceding seven days — is to assess not only whether people are employed, but also the nature of their jobs, the frequency and regularity of their payments, and the overall quality of employment. In an economy where a vast majority of the population are involved in informal work, employment cannot be analysed through a headline rate of high frequency indicator, if it can be called so.

India’s decision to transform the quarterly/yearly unemployment data into a monthly indicator is economically desirable, even if its credibility is questionable given the nature of its database, which seldom takes into account circular migration.

Efforts have been made to strengthen India’s database comprising EPFO (Employees’ Provident Fund Organisation) and ESIC (Employees’ State Insurance Corporation) payroll data, GST-based enterprise information, income tax records, corporate payroll data, gig economy employment data, and rural wage indicators but at present, even these sources remain fragmented. Unlike a mature labour market — comprising payroll surveys, unemployment insurance records, formal contracts, and extensive administrative databases — India’s large informal employment market is difficult to track.

Most advanced nations count unemployment using a Labour Force Survey based on the definition of the International Labour Organization (ILO). The U.S., Japan, EU and the U.K. have decades of household survey data with detailed information on full-time versus part-time jobs, hourly wages, job duration, labour mobility, and unemployment spells.

A leading indicator

The latest Periodic Labour Force Survey (PLFS) says that India’s unemployment rate for those aged 15 years and above marked a four-month low of 5.1% in July. The review period coincided with the peak of kharif season, when demand for agricultural labour rose for land preparation, transplanting, and allied activities. Since construction, agriculture, small trade, logistics, and local services see seasonal fluctuations, it is likely that July’s decline reflects increased hiring in these segments rather than a broad-based expansion in formal sector jobs.

Monthly unemployment should at the best be a leading indicator, not a comprehensive measure of labour market health.

India has a labour market where various reports suggest that 90% of the population are involved in the informal sector; agricultural employment remains seasonal, with wage payments negotiated informally and where underemployment/ disguised employment is widespread. Indicating limited granularity, data is rather sketchy on wage growth, hours worked, job quality, occupational shifts, and sector-wise employment trends. Therefore, monthly unemployment data reflects seasonal movements rather than structural improvement. A fall in unemployment may indicate distress-driven entry into low-productivity jobs rather than genuine employment creation.

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The overall decline in unemployment was owing to rural areas, where unemployment declined to 4.5% from 5%; but it should not be read as a major improvement in the job market. Independent labour studies estimate that there are between 30 to 35 million seasonal labourers moving across India annually, forming the invisible backbone of urban construction and infrastructure.

The July data saw an increase in the labour force participation rate, a positive supply-side signal, but stronger investment and job creation prefix sustainable employment recovery. The challenge is to convert this participation into stable, high-productivity jobs.

The revamped PLFS is a significant improvement over earlier low-frequency labour statistics but its success ultimately depends on whether it gauges the reality of the job market — not merely measuring it more frequently. A credible labour market barometer is the need of the hour to capture the livelihoods of millions of workers.

santosh.v@thehindu.co.in