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How is the Unemployment rate calculated?

India’s unemployment rate is at 8%.

Ever wondered how this is calculated?

Let’s decode.

Calculation of Unemployment Rate

Our population is about 140 crore, with nearly 60% (approx. 80 cr) in the working age group (15-60 years old).

The workforce in India is not more than 50 crore. So how is this 8% number calculated.

They using something called the Consumer Pyramids Household Survey (CPHS)

At any point of time, in the working age population, there are 4 segments of people

Anyone who is

A – currently employed
B – unemployed, willing to work and actively looking for a job
C – unemployed, willing to work but NOT actively looking for a job
B – unemployed, NOT willing to work and NOT looking for a job

The unemployment rate is calculated as B/(A+B)

(A+B) is defined as the total labour force.

Hence it does not include some segments, who have given up looking for a job, or are not willing to work at all. Most countries use the same methodology.

The numbers are calculated from random sampling of a households under the CHPS. The sample includes about 1.77 lakh households, with nearly 5.2 lakh people above the age group of 15 years. A 30 day moving average of the data is reported as unemployment rate.

It is important to read the data in this context, as it gives an indication of how many jobs are to be created in the economy.

An interesting insight here is that while unemployment rate has been steady over the past year, jobs provided by listed companies (considered better quality jobs) have risen by 9% to more than 10 million.


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FinShiksha Learning Championship – Success Story

We would also take this opportunity to congratulate Ankit Shetty from IIM Visakhapatnam. Ankit has secured an internship with PPFAS Mutual fund in the Buy Side Research team. More here

Till next week. Happy learning.