Itaú BBA - CHILE – Labor market improvement continued in November

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CHILE – Labor market improvement continued in November

January 4, 2021

The recovery at the margin is reflecting the economic reopening and economic stimuli.

As activity gradually reopened and stimuli measures filtered through the economy, the labor market recovery advanced in the quarter ended in November. The unemployment rate came in at 10.8%, broadly in line with market expectations. The print was still 3.8pp up from last year’s, despite retreating from the 12.3% recorded in 3Q20 and the cycle peak of 13.1% as of July. Employment fell a milder 12.5% YoY, far less than the 18.2% contraction in 3Q20 and the smallest drop since the quarter ended in April. As the labor force retreated even less (8.8%, vs. -13.5% in 3Q20), the participation rate also improved at the margin to 56.2% (53.4% in 3Q20 and the cycle low of 51.8% in the quarter ended in July), but remains below last year’s 62.8%. In spite of the improvements in recent months, the average annual unemployment rate would end 2020 above the 2019 number (at 10.4% vs. 7.2%).

Commerce, construction, hospitality services, household employment, and transport, which accounted for less than 45% of the labor force in 2019, explain 4/5 of the 1.1 million jobs lost over 12 months. Yet, recovery of employment at the margin highlights the impact of the activity reopening as job gains were led by self-employment and, to a lesser extent, by private waged posts. Some 700 thousand jobs have been recovered since the quarter ended in July, when 1.8 million jobs were shed over 12 months. Hours worked also inched up from the trough of the cycle, but remain below 2019 averages. When all workers are factored in, average hours worked were 36.5 per week (1.7% below 2019, vs. -13.4% in July), while excluding absent workers, these ticked at 39.9, flat from last year (compared to 2% below 2019 in 2Q20).

A gradual activity recovery as the sanitary situation benefits from the roll-out of vaccination, global tail-winds and the effect of economic stimuli measures would support a continuation of the labor market improvement in 2021.
Yet, still fragile labor dynamics and elevated uncertainty over the expected recovery will inspire the central bank to maintain the expansionary monetary stance for most of the two-year policy horizon.

Miguel Ricaurte
Vittorio Peretti 

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