Unemployment rate rises to 5.6% in May; female unemployment more than men

New Delhi, June 17, 2025 — India's unemployment rate rose to 5.6% in May 2025, marking a notable uptick from April’s 5.1%, according to the latest data released by the Centre for Monitoring Indian Economy (CMIE). The report reveals a concerning gender disparity, with female unemployment surpassing male unemployment, spotlighting persistent challenges in achieving inclusive economic growth.

Unemployment Rises Amid Uneven Recovery

The 50-basis-point increase in the national unemployment rate is the steepest monthly jump seen in the past six months. Analysts attribute the rise to a combination of seasonal workforce changes, tepid job creation in key sectors like manufacturing and construction, and the aftermath of weak rural demand.

Dr. Meera Shastri, senior economist at IndiaLab Research, commented, “May’s increase in unemployment reflects a seasonal slowdown but also hints at structural issues, especially with regard to women’s participation in the labor force. Sectors such as textile, hospitality, and retail—which traditionally employ more women—are yet to recover fully.”

Female Unemployment at 8.5% vs 4.9% for Men

The CMIE data indicates that the female unemployment rate climbed to 8.5% in May, significantly higher than the 4.9% recorded for men. Despite educational gains and increased awareness, female labor force participation remains low, and job opportunities remain concentrated in informal or insecure work arrangements.

Labor economist Ranjana Borthakur explained: “There’s a structural disconnect between job availability and accessibility for women. Lack of safety, transport, and flexible working conditions continue to drive many women out of the labor force. The sharp divergence in unemployment figures reveals this troubling reality.”

Urban vs Rural Divide Persists

Urban unemployment rose to 7.4% in May, up from 6.8% in April, driven largely by layoffs in technology firms and slowing hiring in the services sector. Conversely, rural unemployment ticked up to 4.9% from 4.4%, mainly due to delayed monsoons affecting agricultural labor.

States such as Rajasthan (9.8%), Haryana (8.7%), and Kerala (8.2%) reported the highest joblessness, whereas Gujarat and Madhya Pradesh maintained relatively low unemployment rates below 3.5%.

Sectoral Breakdown: Services Sluggish, Manufacturing Tepid

While India's services sector showed marginal improvement in revenue and hiring during Q1 FY26, it was not enough to offset job losses elsewhere. The IT sector, which has seen subdued hiring due to global economic headwinds, remained flat. Manufacturing saw limited expansion due to raw material inflation and cautious consumer spending.

Agriculture, which absorbs a significant portion of India’s informal labor, remained unpredictable due to climate-related disruptions.

Anita Kurien, Head of Workforce Analytics at ThinkJobs, noted, “There’s a mismatch between the skills job seekers have and what employers require, particularly among women. Unless we invest in targeted skilling and gender-sensitive employment policies, this imbalance will persist.”

Policy Response and Government Reaction

In response to the rising unemployment figures, the Ministry of Labour and Employment stated that it is evaluating new schemes focused on rural entrepreneurship and urban apprenticeship programs. Discussions are underway to bolster the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) budget and incentivize private sector job creation through tax credits.

Finance Minister Nirmala Sitharaman recently emphasized the government’s commitment to creating “future-ready jobs” through investments in infrastructure, green energy, and digital transformation.

However, critics argue that the pace of reform is insufficient. “We need a gender-lens approach to job creation, not just macroeconomic spending,” said Aditi Narayan, policy advisor at the Indian Development Forum.

Investor Outlook: Balancing Growth and Inclusion

The rise in unemployment, particularly among women, may serve as a warning signal for investors betting on India’s demographic dividend. Although India remains one of the fastest-growing major economies, sustained growth requires a broad-based employment recovery.

Market analysts suggest that the unemployment figures could temporarily dampen consumer sentiment, especially in sectors like FMCG and retail. However, long-term investors remain cautiously optimistic, citing recent improvements in manufacturing output and digital services exports.

Rohit Tandon, equity strategist at BharatInvest, said, “While the unemployment data adds an element of caution, we believe that job creation will pick up in H2 2025 as global demand stabilizes and India’s capex cycle gains momentum.”

The Road Ahead

The May unemployment numbers serve as both a cautionary tale and a policy prompt. With female unemployment remaining disproportionately high, India faces the dual challenge of improving job availability and enhancing job accessibility—especially for women. Without addressing this gender gap and structural inefficiencies in the labor market, India's economic engine risks operating below capacity.

As policymakers deliberate and markets digest the implications, the coming months will be crucial in determining whether India can recalibrate its growth strategy to be both inclusive and resilient.