Youth unemployment rises in urban areas in third quarter as manufacturing jobs decline

The country's overall unemployment rate was steady at 6.4 percent

Indian economy’s bounce back in the third quarter of FY25 was not even, as youth unemployment rose faster in urban areas, despite overall unemployment rate holding steady in the third quarter, according to a Moneycontrol analysis.

Periodic Labour Force Survey data released by the government on February 18 indicated that most states (13 of 22) recorded a rise in the number of unemployed people aged 15-29.

Youth unemployment increased to 16.1 percent during October-December 2024, compared with 15.9 percent in the previous quarter. The country's overall unemployment rate was steady at 6.4 percent.

Experts indicate that a shift away from manufacturing jobs may be one of the reasons for the rise in youth unemployment.

“Manufacturing could be one of the causes of a decline in youth unemployment. It could also depend on the type of employment that the youth are getting, if they are not employed in a regular or salaried job, it could also lead to an increase in unemployment,” said Paras Jasrai, senior analyst, India Ratings and Research.

Data indicates that the number of people employed in the secondary sector declined in Q3FY25, as the workforce moved to the agriculture and tertiary sectors.

Manufacturing growth will likely slow down 6.5 percent in FY25 from 9.7 percent in FY24, according to first advance estimates released by the government in January.

Himachal Pradesh, Bihar, and Punjab were the worst afflicted, as youth unemployment rose faster in these states than in others.

Bihar, which already has high unemployment rates, saw an increase of 3.2 percentage points. For the three months ending in December, over a quarter (26.4 percent) of the population willing to work were unable to find jobs in the eastern state due for elections later this year.

Gender gap widens

Another indicator of rising inequity and uneven development was the faster pace of increase in unemployment rate among the 15 to 29-year-old women compared with men.

While the unemployment rate among young women rose to 21.4 percent from 21 percent in the previous quarter, the rise in male unemployment for the same age group was much less pronounced, at 14.4 percent, compared to 14.2 percent earlier.

Among the states, Himachal witnessed a near 10-point increase in female unemployment, with over half the young women unemployed.

Himachal is among the states that have announced a direct cash transfer scheme for women. Others like Maharashtra and Madhya Pradesh, which have announced similar programmes, also witnessed increased unemployment rates among the young women.

Although youth unemployment has declined from the over 20 percent rates witnessed prior to the pandemic, data shows that the decline has been slower.

In Q1FY19, the gap between youth urban unemployment rate and overall urban unemployment rate was 2.4 times, which increased to 2.52 times in Q3FY25.

Formal tilts towards experience

This preference for experience is also visible in formal employment numbers.

Enrollments in social security schemes indicate a shift towards workers aged 29 and above in the post-pandemic period.

The 29 and above accounted for nearly 40 percent of enrollments in government schemes in the first eight months of FY25, like the Employees’ Provident Fund Scheme, compared with 21.7 percent in FY19.