India registered the biggest fall in employment during a non-lockdown month in June as jobs fell by a massive 13 million from 404 million in May to 390 million in June, according to the Centre for Monitoring Indian Economy.

While about 13 million lost jobs during the month, the count of the unemployed increased by only 3 million, writes Mahesh Vyas, managing director at CMIE. "The rest exited the labour markets. As a result, the labour force shrunk by 10 million in June 2022," he says.

The employment rate fell to 35.8% in June 2022 - its lowest level in two years – led by rural areas.

Labour market ratios worsened across rural and urban regions in June but the deterioration was far more pronounced in rural regions. Labour participation rate fell in rural India from 41.3% in May to 39.9% in June. This fall of 1.4 percentage points is much larger than the 0.4 percentage point fall in the LPR in urban India where it fell from 37.1% to 36.7%.

"While this sharp fall in employment and an equally sharp deterioration in the principal labour market ratios is alarming, the worsening of the labour market is not widespread across the country," writes Vyas. "The June debacle was essentially a rural phenomenon. Also, the fall was located largely in the informal markets. It is possible that this is largely a labour migration issue and not a larger economic malaise that led to the fall in employment in June."

Vyas cites patchy southwest monsoon in the first fortnight of June for the loss of jobs in June. "Rains were 32 per cent below normal during the first fortnight. This could have slowed the deployment of labour into the fields. The agricultural sector shed nearly 8 million jobs in June. These were mostly in plantations. Crop cultivation added 4 million jobs. This is lower than the additions seen in June 2021 and June 2020."

The monsoon was sluggish till June 15 and the rural labour force participation rate fell during this period. Then, as the monsoon revived, the LPR improved as well. It is expected that as the monsoon picks up in the coming weeks, employment in rural India will revive.

Meanwhile, the unemployment rate rose from 7.1% in May to 7.8% in June, data released by CMIE shows. The unemployment rate shot up by 1.4 percentage points to 8% in rural India in June. However, in the towns and cities the unemployment rate declined by 0.9 percentage points to 7.3%, which is the lowest unemployment rate in India in 16 months. A shrunken labour force held back the unemployment rate from rising sharply, writes Vyas.

June 2022 saw a fall of 2.5 million jobs among salaried employees.

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