Hiring activity poised to get a shot in arm

Shouldn't the Indian government be more tolerant towards inflation? At least that's what the Phillips Curve theory suggests in depicting an inverse relation between the rates of inflation and unemployment. One could be traded off for the other: if inflation is high, unemployment is low and vice versa.

The theory was developed by New Zealand-born economist A.W. Phillips. His paper 'The relationship between unemployment and the rate of change of money wages in the United Kingdom 1861-1957' was published in 1958. The theory has lost some of its relevance in modern times, but has not been wiped out of academics in its entirety.

For the past few quarters, rising inflation has been bugging the Indian government. It reached levels which sounded alarm bells at the Reserve Bank of India, India's central bank. RBI intervened to check the rise in prices by controlling the money supply in the economy.

But let's look at the other side of the relationship. According to Phillips' theory the reward must come in the form of employment generation. And it is coming.

"How do you anticipate total employment at your location to change in the three months to the end of September 2007 as compared to the current quarter?" This was the question asked to 4,925 employers in India by research firm Manpower. The survey reported the hiring intentions of employers for the quarter July-September.

The survey threw up a very positive outlook of employment generation. Forty-two per cent of employers expect an increase in staffing levels in the third quarter of 2007, three per cent anticipate a decrease, and 42 per cent are expecting no change. The Net Employment Outlook therefore stands at a prosperous +39 per cent. [The Net Employment Outlook is derived by taking the percentage of employers anticipating total employment to increase, and subtracting from that, the percentage expecting to see a decrease at their location.]

This outlook represents a moderate rise of eight percentage points since the second quarter of 2007, though year-over-year this reveals a slight fall of four percentage points.

Employers in all four regions in India anticipate positive hiring intentions. Whilst employers in the North and East regions report solid outlooks, employers in South and West regions anticipate booming outlooks of +44 per cent and +41 per cent respectively. Quarter-over-quarter, hiring activity is anticipated to strengthen in three of the four regions, with a slight decrease in hiring intentions expected in the North (two percentage points).

Year-over-year, the North represents the largest decrease of all the regions [16 percentage points], while the South region reports the only increase in hiring activity (two percentage points) and the West remains unchanged.

The hiring intentions of employers in all but two industry sectors reveal quarter-over-quarter increases in Net Employment Outlook with the finance, insurance and real estate and the services industry sectors reporting the strongest increase (13 percentage points).

Year-over-year comparisons reveal decreases in four of the seven Indian industry sectors, with mining and construction reporting the largest decline in hiring activity (12 percentage points). The transportation & utilities and wholesale & retail trade sectors both report slight increases in outlook of one percentage point, while no change in outlook is reported in the manufacturing sector.

Given that the Manpower survey's margin of error of all national, regional and global data has not been more than +/- 4.3 per cent and +/- 1.5 per cent for Indian data, the depiction of the future job scene seems quite rosy. So it probably pays off to sink in some price rise. The reward is coming in the form of lower unemployment.