Itaú BBA - CHILE - Despite pickup in job growth, labor market loosened in 1Q17

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CHILE - Despite pickup in job growth, labor market loosened in 1Q17

April 28, 2017

The soft labor market numbers will likely reinforce the central bank’s activity concern

The unemployment rate continued to rise in the first quarter of 2017. Compared to the final quarter of 2016, employment growth has picked up but is mainly due to creationof low quality jobs. The unemployment rate came in at 6.6% in the quarter, up 0.3 percentage points from one year before, and in line with ours and market expectations. The soft labor market numbers will likely reinforce the central bank’s activity concern and will support additional monetary easing in the coming months.

Total job growth pickup up to 1.4%, up from the 1% in 4Q16. Meanwhile, the labor force growth increased to 1.8% from 1.3% in 4Q16. The principal sectors supporting the 117 thousand-job creation include commerce (39 thousand) and manufacturing (32 thousand). Employment in transportation, health and other services contributed a combined 39 thousand jobs. Employment in the construction sector returned to growth (9 thousand) following five consecutive months of declines. On the contrary, sectors destroying jobs remain financial services (32 thousand), technicians (13 thousand) and mining (12 thousand), while household employment continues to decline (16 thousand).

Self-employment is picking-up. The employment gains are led by the 6.6% year over year increase in self-employment (4.6% in 4Q16). Meanwhile, salaried employment contracted 0.4% from one year earlier, in spite of a low base of comparison, worsening from the 0.1% drop in 4Q16. Additionally, of the net jobs created, those that lack contracts increased by 7.6% in the quarter (4.6% in 4Q16),also reflective of the job growth weakness.

We expect the labor market to remain weak in the months ahead as there is no clear catalyst to inspire an economic turnaround. We expect the unemployment rate to average 7.0% this year (from 6.5% in 2016).


 

Miguel Ricaurte

Vittorio Peretti

 



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