India’s labour market continues to show worrying signs of imbalance. Even as the overall unemployment rate eased slightly in the July–September 2025 quarter,
urban joblessness rose sharply, revealing a growing mismatch between economic growth and employment generation. According to Forbes India, citing official data from the Periodic Labour Force Survey (PLFS), the urban unemployment rate climbed from 17.9% to 18.4% between the first and second quarters of FY26, underscoring the lack of job creation in cities despite economic recovery. While the national unemployment rate for persons aged 15 years and above fell modestly from 5.4% to 5.2%, the youth unemployment rate (15–29 years) edged up from 14.6% to 14.8% over the same period. Forbes India reported that the spike in joblessness was concentrated in educated, urban youth , a demographic struggling to find opportunities in formal sectors. States Hit Hardest Nine states accounted for most of the increase in urban joblessness, with north Indian states showing the steepest rises.
- Uttarakhand recorded a staggering 14.9 percentage point jump in unemployment.
- Himachal Pradesh and Jammu & Kashmir saw increases of 4.3 and 3.5 points, respectively.
- Even major economies like Tamil Nadu (2.1 points) and Uttar Pradesh (2.7 points) registered notable upticks.
Analysts say these figures highlight the deep structural challenge India faces in creating quality employment for its younger workforce.
Workers Moving Back to Agriculture
In a troubling reversal of India’s industrialisation goals, Forbes India notes that more workers are returning to agriculture.
The share of the workforce employed in the farm sector rose from 39.5% to 42.4%, while employment in manufacturing and mining fell sharply from 26.6% to 24.2%. The services sector also slipped slightly, from 33.9% to 33.5%.
This shift indicates that non-farm sectors are failing to absorb labour, forcing workers to fall back on the monsoon-dependent agricultural sector , a sign of underemployment rather than true job creation.
Industrial States See Factory Job Losses
The downturn in manufacturing employment was particularly pronounced in industrial states:
- Chhattisgarh saw a 12.4-point drop in manufacturing jobs.
- Odisha reported a 9-point decline.
- Andhra Pradesh and Telangana experienced contractions of 7.5 and 6.9 points, respectively.
Only Gujarat, Himachal Pradesh, Tamil Nadu, and Haryana managed marginal gains in manufacturing employment.
An Economy at a Crossroads
The Forbes India analysis concludes that the combination of urban youth unemployment, declining industrial jobs, and rising agricultural dependence paints a concerning picture for India’s labour market. Without stronger non-farm job creation, the shift back to agriculture could stall productivity and wage growth, even as headline unemployment numbers appear stable.
