Thursday, 20 Nov, 2025
Photo courtesy: Pixabay
Hiring held steady in Q2 FY26 as more people entered the workforce, but the gains were uneven, with young jobseekers still struggling and more people slipping into informal work
The labour market showed modest stability in the second quarter of FY26, even as more people stepped into the workforce. But a closer look at the latest government data suggests that the improvement is uneven, with young workers struggling to find jobs and more people slipping into low-quality or informal work.
The Periodic Labour Force Survey (PLFS) from the National Statistics Office, covering July to September, shows the unemployment rate for people aged 15 and above fell to 5.2 per cent, down from 5.4 per cent in the previous quarter. This measure, known as the current weekly status, counts someone as unemployed if they did not get even one hour of work in the reference week but were available or looking for work.
On the surface, the drop suggests stronger labour-market conditions. But the gains were heavily concentrated in rural India, where employment swings are closely linked to agriculture. Rural unemployment declined to 4.4 per cent, from 4.8 per cent, helped by seasonal farm activity. Urban joblessness, meanwhile, edged up to 6.9 per cent from 6.8 per cent, showing that cities continue to face pressure in creating steady jobs.
More people are also joining the labour force. The labour force participation rate rose slightly to 55.1 per cent from 55 per cent, driven mostly by more women seeking work. This increase is important: rising participation generally means that people feel more encouraged about finding employment. But it also raises the bar for job creation. Unless the economy produces enough work opportunities, more entrants can end up swelling the ranks of the unemployed.
That pressure is showing most clearly among young workers. Unemployment among people aged 15–29 rose to 14.8 per cent, up from 14.6 per cent. For young women, the increase was sharper: joblessness climbed to 17 per cent, from 16 per cent. Because this age bracket consists of first-time job seekers, rising unemployment here signals deeper challenges—such as slow hiring in formal sectors, skill mismatches, and industries unable to absorb new graduates.
Another worrying trend is the shifting composition of employment. The share of self-employed workers—including unpaid family workers and own-account workers—rose to 55.8 per cent, up from 54.4 per cent. While self-employment can reflect entrepreneurship, such a sudden increase often points to a lack of better alternatives. Many households may be turning to informal, unstable, or subsistence-level work, especially as formal jobs remain scarce.
Meanwhile, the share of regular salaried workers fell slightly to 25.4 per cent, from 25.2 per cent. This decline may seem small, but it continues a long-standing pattern: formal, secure jobs remain limited even as the population grows. Without an expansion in salaried positions, incomes will remain unpredictable, affecting household spending and long-term economic confidence.
Sectoral shifts highlight these strains. The share of workers in agriculture increased sharply to 42.4 per cent, from 39.5 per cent. The secondary sector—which includes manufacturing and construction—saw its share drop to 24.2 per cent, from 26.6 per cent. This shift back into farm work suggests that industry and construction are not generating enough jobs, pushing workers to rely on agriculture as a fallback. This pattern, repeated over many years, holds India back from moving toward higher productivity and higher incomes.
The PLFS itself has undergone major changes. The NSO introduced a new rotational panel sampling approach this year, where each household is visited four times—one initial visit and three-monthly revisits. The aim is to deliver more accurate, timely estimates for both rural and urban areas. The current report is the second quarterly release under this new methodology.
More recent monthly numbers suggest a slight cooling at the end of the quarter. In September, unemployment rose to 5.2 per cent, up from 5.1 per cent in August, driven mainly by rural areas as the sowing season ended. Such seasonal dips are typical, but they reinforce how dependent rural employment remains on agriculture cycles.
What it means
Taken together, the data shows a labour market that is holding up but not gaining momentum. Falling headline unemployment looks encouraging, yet the underlying patterns tell a more complex story. Rising youth unemployment, a shrinking share of salaried jobs, and growing reliance on agriculture and self-employment indicate that the economy is still struggling to create stable, high-quality work.
For policymakers, the message is clear: India needs stronger employment engines outside agriculture, especially in manufacturing and services. Without more durable job creation, the long-term recovery could lose steam just as more people—especially women and young workers—enter the workforce.
