Itaú BBA - COLOMBIA – Employment recovering in 3Q20

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COLOMBIA – Employment recovering in 3Q20

October 30, 2020

While the labor market is recovering, numerous uncertainties point to a gradual improvement ahead

As the mandatory quarantine was lifted in September, labor market dynamics continued to improve. In September, the urban unemployment rate came in at 18.3%, up 8.2pp from one year ago, but far milder than the 12.5pp average increase over the prior five months, suggesting the worst of the labor market adjustment has unfolded. The result came in above our 17.1% call, while close to the 18.1% market consensus. Overall, the national unemployment rate rose 5.5pp from last year to 15.8% in September to close the third quarter at 17.5% (20.3% in 2Q20). Total employment contracted 9.0% yoy in September, moderating from the registered drops since the start of the crisis (-19% on average between April and August). Meanwhile, the seasonally adjusted series shows employment rose 2.9% from August, building on the 7.6% previous gain. Additionally, participation is recovering, up to 60.2% in September and 58.9% in 3Q20 (54.8% in 2Q20), showing that the falling unemployment rate, at the margin, is being driven by job gains.

Self-employment is leading the job recovery, but gains are widespread. Self-employment shrunk 6.7% yoy in 3Q20, far milder than the 17.9% drop in 2Q20, in line with the lifting of the mandatory quarantine and the flexible nature of the category. Meanwhile, private salaried jobs declined 18.4% in 3Q20, also recovering from the 25.5% drop in 2Q20, reflecting the labor recovery is widespread and bodes well for consumption dynamics. By sector, the bulk of the recovery occurred in agriculture (-0.4% yoy vs. -12.4% in 2Q20), commerce (-12.7%, from -19.8% previously), construction (-9,1% yoy vs. -30.4% in 2Q20), manufacturing (-10.7% yoy vs. -30.0% in the previous quarter), and entertainment and recreation (-21.8% vs. -34.2% in 2Q20).

While the labor market is recovering, uncertainties around the economic bounce back and the onset of a second wave of the virus likely point to a gradual improvement ahead. We expect the unemployment rate to average 17% this year, up from 10.5% last year.

Miguel Ricaurte
Carolina Monzón

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