Urban Jobs Are the Weak Link in India’s Otherwise Stable Labour Story

India’s unemployment rate ticked up marginally in December, but the headline number masks an  uncomfortable reality. At 4.8%, unemployment remains below the psychologically important 5% mark, yet the labour market’s stress points are becoming harder to ignore, especially in cities, and particularly for young people and women.

The latest monthly bulletin of the Periodic Labour Force Survey shows unemployment rising slightly from 4.7% in November, even as it stays well below the summer peak of 5.6% seen in May and June.

Note: Unless otherwise mentioned, all numbers pertain to those aged 15 years and above.

Rural unemployment held steady at 3.9% in December. Urban unemployment, however, climbed to 6.7% from 6.5% a month earlier. This rural-urban split points to a labour market where cities, long seen as engines of job creation, are struggling to absorb workers.

The pressure is most acute among the young. For urban men aged 15–29 years, unemployment rose by half a percentage point in December to 15.8%, the sharpest increase across demographic groups. For urban women in the same age bracket, unemployment fell by 0.8 percentage points, the most notable improvement during the month, but remained alarmingly high at 24.9%. In effect, nearly one in four young urban women actively seeking work was unable to find it.

Rural youth fared no better in relative terms. Unemployment for both young men and women in rural areas edged up, with rates remaining above 12%.

Participation Gaps

Labour force participation offers a partial counterpoint. The overall LFPR rose to 56.1% in December from 55.8% in November, the highest level since April 2025. The increase was driven largely by rural areas. Rural women’s LFPR crossed 40% for the first time in this period, while rural men’s participation rose to 79.3%.

Urban women’s LFPR remained stuck at a low 25.3%, and urban men’s participation fell below 75% for the first time since April. What this really shows is a widening gap between where people are willing to work and where jobs are actually being created.

The message from the cities is not reassuring. Unemployment is creeping up, even as fewer people stay in the job hunt. This is not limited to any single group, but women and younger workers are clearly worse off than the rest.

How is the unemployment rate calculated?

These figures come from the PLFS, a large national household survey run by the Ministry of Statistics and Programme Implementation. The December 2025 estimates draw on responses from nearly 374,000 individuals across over 89,000 households, using the current weekly status method to identify those actively seeking work, with the last seven days are the reference period. 

The survey considers a person as unemployed in a week if they did not work even for one hour on any day during the reference week but sought or were available for work at least for one hour on any day during the reference week. 

A person who is looking but is unable to find work is considered unemployed. They are different from those who are neither working nor looking for work (such individuals are considered to be out of the labour force).

Unlike inflation, there is no officially defined “ideal” unemployment rate. Some level of unemployment—often termed natural unemployment—is considered inevitable, even healthy, in a functioning economy. Many estimates place this in the 3–5% range. By that yardstick, India’s aggregate unemployment rate does not look alarming.

But averages conceal distributional stress. The fault lines are no longer hard to spot. Cities are not doing enough of the heavy lifting on jobs. Young people are waiting longer to be absorbed into the workforce, and women remain the easiest to exclude. Participation may be rising, but hiring is not—​and addressing that gap must be our utmost priority.