Waning consumer sentiment, vanishing jobs add to worries
The second deadly wave of Covid infections in April has expectedly hit the marginally recovering job market hard. Local lockdowns and postponement of projects in the pipeline have taken away 75 lakh jobs, pushing the unemployment rate to a four-month high of 8%, according to the Centre for Monitoring India Economy (CMIE).
Expectedly, the impact of the renewed slowdown was greater on urban areas where joblessness touched 9.78%, compared to rural unemployment where it was at 7.13%. These are all comparative figures to March, when the all-India unemployment rate stood at 6.5%. The same pattern is seen in white-collar jobs in areas such as IT and financial services. A survey of LinkedIn and direct postings on job boards showed active vacancies fell 31%, from 2,90,000 in March to 2,00,000 in April.
The mounting toll of Covid infections and deaths, and the inability of the government to deal with the crisis, had a further spin-off effect with consumer sentiment taking a battering. According to CMIE, the index of consumer sentiment was on a free fall in April, as it fell 4.3% for the week ended April 18, then 4.5% for the next week and slipped another 5.4% in the week ended May 2. Overall, the index declined 3.8% in April, the sharpest fall in a year since May 2020.
The sharp rise in urban unemployment shows the phenomenon of reverse migration of workers going back home to the villages from cities has again become pronounced, though it is not a stampede as it was in the first phase. The other worrying factor in the sharp decline in unemployment is that government measures to shore up the economy are not working.
For instance, in this phase, though lockdowns have not been imposed on industry and construction, voluntary shutdowns and panic departure of labour are jamming the wheels of recovery. Recovery projections will now depend on how long the second pandemic wave lasts, and whether a third wave is in store. But optimistic projections of growth at 10% and above made for the current year are now sure to be pared down.