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CHILE – Waiting for the labor market recovery

February 28, 2019

Some tightening of the labor market is expected this year as it benefits from the lengthy activity recovery

The labor market continued to show a mixed performance at the beginning of 2019. The unemployment rate for the quarter ending in January came in at 6.8%, in line with expectations, but was 0.3pp higher than one year earlier. Meanwhile, job creation moderated to 0.6% year-over-year, from 0.7% in 4Q18, the lowest since the quarter ended in November. Complementary sources of information (capturing formal employment) that the central bank monitors show mixed results. Pension contributors (AFP) are growing at a brisk pace (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. Given labor market dynamism generally lags the economic recovery, last year’s activity pick-up, along with expect ations t hat recovery consolidates throughout this year, some improvement of labor market dynamics ahead is likely.

The unemployment rate increase from last year from last year was contained by falling participation. Labor force participation came in at 59.7%, below the 60.3% recorded in the rolling quarter ended in January 2018, but still showed some improvement from the winter (when it recorded at minimum of 59.2%). Job growth was still boosted by waged job creation (+43 thousand), but private payrolls weakened in at the beginning of the year, while self-employment returned to growth. Public salaried jobs grew 2.7%, moderating from 3.2% in 4Q18 and 5.6% in 3Q18. In fact, this was the lowest public job growth since 1Q17, a sign that fiscal consolidation intensifies. Private salaried jobs grew 0.3% (0.9% in 4Q18 and 1.1% in 3Q18), the slowest since the 0.7% drop in 4Q17. Meanwhile, self-employment growth recovered to 1.2% (-1.3% in 4Q18 and +0.2% in 3Q18). Categories driving total job growth in the quarter were health, education and administrative services, while manufacturing led job shedding.

We see some tightening of the labor market (unemployment to 6.7%, below last year’s 7%) this year as it benefits from the lengthy activity recovery. We note that the Institute of Statistics is in the process of revising labor statistics, gradually updating samples on the back of information collected in the 2017 Population Census and crosschecking with complementary data sources (some pointing at higher employment growth).

 

Miguel Ricaurte
Vittorio Peretti



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