Editor's Pick: Worrying signs for the economy

Rising unemployment, including among the salaried class and shrinking real incomes, has led to a lack of demand that is not a good sign for the economy, Mahesh Vyas, managing director at the Centre for Monitoring Indian Economy (CMIE) told The Hindu in an interview on Monday. Labour participation rate recovered soon after the lockdown was eased last year but has run out of momentum even before it could recover fully and unemployment has risen to 8% in April from 6.5% in March, according to CMIE data. Mr. Vyas observed that the economy had recovered after the lockdowns were eased in 2020, but while supply side indicators saw a robust turnaround there was a lack of demand. “Income and consumer sentiment have also been hit. Income is lower than it was a year earlier. 90% of families have seen income shrinkage (i.e., real income, adjusted for inflation).” Significantly, the size of the salaried class shrank for the third consecutive month in April, with 3.4 million jobs lost. During 2019-20, there were 85.9 million salaried jobs. As of April 2021, there were just 73.3 million. The strain in labour markets in April was not entirely because of the partial lockdowns but largely because the economy simply could not provide employment to large numbers who sought work, CMIE had observed in a statement earlier this month. "This is critical because it is only domestic consumption that will help the economy,” Mr. Vyas noted, adding that it was important to put money in the hands of the consumer now. Separately, RBI officials on Monday have flagged a ‘demand shock’ from the COVID-19 second wave. “Real economy indicators moderated through April-May 2021.The biggest toll is in terms of a demand shock – loss of mobility, discretionary spending and employment,” they said in the monthly bulletin. The bulletin adds, tentatively, that the loss of momentum may not be as severe as at this time a year ago but these are still worrying signs as the ripple effects of the second wave on the economy are now beginning to register. That marks this story out as our top pick of the day. The Hindu's Editorials Unwarranted arrest: On sedition charges against Raghu Ramakrishna Raju Avoiding breakdown: On GST council meeting Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor's Pick and more. Click here Try out The Hindu's daily news quiz Who is the Palestinian leader of Hamas in Gaza, whose house was bombed by Israel during the ongoing conflict? 1. Hassan Yousef 2. Fawzi Barhoum 3. Yehya Al-Sinwar 4. Khaled Mashal To find out the answer and play the full quiz, click here [logo] Editor's Pick 18 MAY 2021 [The Hindu logo] In the Editor's Pick newsletter, The Hindu explains why a story was important enough to be carried on the front page of today's edition of our newspaper. [Arrow]( [Open in browser]( [Mail icon]( [More newsletters]( Worrying signs for the economy [Worrying signs for the economy] Rising unemployment, including among the salaried class and shrinking real incomes, has led to a lack of demand that is not a good sign for the economy, Mahesh Vyas, managing director at the Centre for Monitoring Indian Economy (CMIE) told The Hindu in an[interview]( Monday. Labour participation rate recovered soon after the lockdown was eased last year but has run out of momentum even before it could recover fully and unemployment has risen to 8% in April from 6.5% in March, according to CMIE data. Mr. Vyas observed that the economy had recovered after the lockdowns were eased in 2020, but while supply side indicators saw a [robust turnaround]( there was a lack of demand. “Income and consumer sentiment have also been hit. Income is lower than it was a year earlier. 90% of families have seen income shrinkage (i.e., real income, adjusted for inflation).” Significantly, the [size of the salaried class shrank]( for the third consecutive month in April, with 3.4 million jobs lost. During 2019-20, there were 85.9 million salaried jobs. As of April 2021, there were just 73.3 million. The strain in labour markets in April was not entirely because of the partial lockdowns but largely because the economy simply could not provide employment to large numbers who sought work, CMIE had observed in a statement earlier this month. "This is critical because it is only domestic consumption that will help the economy,” Mr. Vyas noted, adding that it was important to put money in the hands of the consumer now. Separately, RBI officials on Monday have flagged a ‘demand shock’ from the COVID-19 second wave. “Real economy indicators moderated through April-May 2021.The biggest toll is in terms of a demand shock – loss of mobility, discretionary spending and employment,” they said in the monthly bulletin. The bulletin adds, tentatively, that the loss of momentum may not be as severe as at this time a year ago but these are still worrying signs as the [ripple effects of the second wave on the economy]( are now beginning to register. That marks this story out as our top pick of the day. [underlineimg] The Hindu's Editorials [Arrow][Unwarranted arrest: On sedition charges against Raghu Ramakrishna Raju]( [Arrow][Avoiding breakdown: On GST council meeting](  [underlineimg] Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor's Pick and more. [Click here]( [underlineimg]  Try out The Hindu's daily news quiz Who is the Palestinian leader of Hamas in Gaza, whose house was bombed by Israel during the ongoing conflict? 1. Hassan Yousef 2. Fawzi Barhoum 3. Yehya Al-Sinwar 4. 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