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CHILE – Downside unemployment surprise as participation drops

March 29, 2019

Composition of job growth has deteriorated

In the quarter ending in February, the unemployment rate was stable over twelve months, the first occurence since May last year, however, not all was positive. The 6.7% unemployment rate came in below the Bloomberg market expectation of 6.9% and our 7.0% call. Employment grew 0.5% yoy, down from 0.7% in 4Q18, but was offset by the slowdown of labor force growth to 0.6% from 1.1% as participation fell 0.7pp (the sharpest 12-month decline since the quarter ending in August 2012). Meanwhile, the composition of job growth has deteriorated with shedding of private salaried jobs for the first time since 4Q17. Complementary sources of information (capturing formal employment) that the central bank monitors show mixed signals. Pension contributors (AFP) grew 3.8% yoy in the qu arter en ding in January (3.9% for the 4Q18, 3.4% in 3Q18 and 4.0% in 2Q18), while data captured by the labor ministry (SIL) points at a slowdown at the end of 2018. The labor market evolvement continues to lag the notable economic recovery last year, hence some improvement is likely throughout the year as the recovery consolidates.

Job growth of 45 thousand over twelve months (59 thousand in 4Q18) was boosted by self-employment and salaried public posts. Total salaried waged job creation (+12 thousand), was boosted by the public growth of 2.7% yoy (3.2% in 4Q18), but private payrolls contracted 0.3% yoy (+0.9% in 4Q18). Meanwhile, self-employment growth accelerated to 2.4% yoy, following the 1.3% drop in 4Q18. Categories driving total job growth in the quarter were health, education and administrative services, while commerce and transport led job shedding.

We expect employment dynamism to improve this year as the activity recovery consolidates, resulting in some tightening of the labor market (unemployment rate of 7.0% last year).


Miguel Ricaurte
Vittorio Peretti

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