Itaú BBA - CHILE – Job recovery continued in October

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CHILE – Job recovery continued in October

November 27, 2020

Lower unemployment was led by job gains at the margin

The labor market improved at the margin amid the consolidation of the economic reopening. The unemployment rate reached 11.6% in the quarter ending in October, in line with our call (Bloomberg market consensus: 11.7%), representing a 4.5 percentage point increase over twelve months. The magnitude of the rise from last year is milder than the 5.0pp recorded in 3Q20 and the cycle peak of 5.6pp during the July quarter. Employment contracted 14.8% YoY in the quarter. Meanwhile, the labor force dropped by a milder 10.5% YoY (13.5% down in 3Q20 and -15.6% during the July quarter), as the participation rate improved at the margin to 55.0% (from 53.4% in 3Q20 and 51.8% in July), indicating that the lower unemployment rate was led by job gains. In the Santiago Metropolitan Region, the unemployment rate was higher, reaching 12.7% in the quarter (13.2% in 3Q20). The share of employed laborers classified absent (which includes those under the employment protection program) dropped from 15% in 3Q to 11.7%, as the reopened economy and activity reigniting have led to partial job return.

Job gains occurred across the board, with private salaried posts and self-employment leading the recovery amid looser mobility conditions. Salaried employment contracted 9.6% YoY, milder than the 12.5% drop in 3Q. Private salaried posts shrunk 12.1% (15.2% in 3Q), while public-sector posts rose for the first time since April. Meanwhile, self-employment dropped a significant 22.5% YoY (28.7% down in 3Q20). By sector, gains were led by commerce, construction, and manufacturing. In another signal that the worst has likely passed, the effective labor force (hours worked multiplied by employment) contracted a milder 13.1% YoY (-18.3% in 3Q).

As private sentiment improves, encouraging news of vaccines continues and an additional stimulus through an eventual second pension fund withdrawal is likely, a further recovery of the economy and labor market is on the horizon.
We expect unemployment rate to average 10.4% this year (7.2% last year), moderating to 8.7% during 2021.

Miguel Ricaurte
Vittorio Peretti 

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