Itaú BBA - CHILE – Unemployment ticks down in August amid fiscal boost

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CHILE – Unemployment ticks down in August amid fiscal boost

September 30, 2019

As the labor market reflects economic slack, it would bolster views that demand-side inflationary pressures remain low

Robust public employment growth, along with falling participation (-0.3pp) led to the unemployment rate in the quarter ending in August falling 0.1pp (from one year before) to 7.2%, in line with expectations. Employment grew 1.5% yoy in the quarter, up from 1.0% in 2Q19 and the highest gain since 2Q18, although the pace of private salaried job growth remains contained. Meanwhile, the labor force expanded 1.4%. In the greater Santiago area, the country’s economic hub, dynamics were worse with the unemployment rate ticking up 0.1pp over twelve months, edging closer to 8%, while the participation drop was even sharper (-0.6pp). Overall, weak private sector job dynamism along with still declining participation reflect economic slack and would likely bolster central banker views that demand-side inflationary pressures remain low.

Private sector job growth improved from the 1.0% yoy drop in 2Q19, but remains weak (0.3% yoy). Total job growth in the quarter ended in August was lifted by public jobs, which expanded 8.5% yoy (the fastest pace since early last year), as the administration implements stimulus measures. Meanwhile, self-employment grew 1.4% yoy, moderating from 2.6% in 2Q19 and now below the headline gain. Overall, payrolls expanded 1.5% yoy (1% in 2Q19, 1.2% in 1Q19), lifted by public administration and health services, while the key drag to job growth came from manufacturing.

Employment dynamism is unlikely to pick up meaningfully during the remainder of the year given our view that growth would continue to slow amid global headwinds. However, the persistent drop in participation means that the unemployment rate for this year could come in below our 7.0% call.

Miguel Ricaurte
Vittorio Peretti

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