Firms dither on hiring as labour market stagnates, says NCAER survey- QHN

The share of companies looking to increase permanent employees in the next six months nearly halved to 15.9 per cent in the September quarter from 30.9 per cent in the previous quarter, reflecting the stress in the labour market. 

Similarly, the share of firms planning to add more temporary workers to their workforce declined to 35.6 per cent from 45 per cent in the same time period.

Along with the employment patterns over the past three months, companies also expressed their sentiments about the prospects of employment in the coming six months in the latest Business Expectations Survey (BES) for Q2FY24, released by the National Council of Applied Economic Research (NCAER) late Thursday. 

The 126th round of the survey, covering 500 firms, was conducted in September, with support from the National Stock Exchange (NSE). 

The NCAER has been conducting the BES every quarter since 1991 across the four regions.

According to the survey, the labour market will remain stressed as sentiments about the hiring of workers over the next six months are stagnant, with the majority of firms (83.3 per cent) expecting no change in the workers employed. 

Besides, the share of firms expecting an increase in the hiring of skilled workers in the next six months declined to 24.9 per cent in the September quarter from 27.9 per cent in June quarter, whereas the share of unskilled workers to be hired dropped to 21.1 per cent from 31.1 per cent in the corresponding period.

“In sum, the labour market situation in Q2FY24 was mixed, with the majority of firms expecting hiring of labour of various types to remain unchanged. Plus, a very small percentage of firms expected hiring of various types of workers to decline,” the survey noted.

Bornali Bhandari, professor, NCAER, said the survey largely reflected a stagnation in the labour market as the majority of firms expressed their willingness to keep their labour force unchanged. 

“While the survey results are only an indication of the sentiments, they do show that job creation remains a challenge for the economy as firms are expressing low intent to hire skilled and permanent workers,” she added.    

Akin to the employment trends, the share of firms reporting an increase in wage rates for the next six months, for both skilled and unskilled workers, also declined in the same period. While the share of firms expecting an increase in unskilled workers’ wage rates declined to 32.1 per cent from 38.6 per cent, the corresponding decline for skilled workers stood at 30.7 per cent from 37.4 per cent.

Moreover, the survey also points to an increase in the business confidence index (BCI), which improved to 140.7 in the second quarter from 128 in the first quarter as the share of firms expecting production, domestic sales and pre-tax profits to increase was more in Q2 compared to Q1. Business sentiments were more buoyant about domestic markets than external markets. 

The BCI is based on four components — ‘overall economic conditions will improve in the next six months’, ‘financial position of firms will improve in the next six months’, ‘present investment climate is positive’, and ‘present capacity utilisation is close to or above the optimal level’.