Itaú BBA - COLOMBIA – Improving labor market signs in February

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COLOMBIA – Improving labor market signs in February

March 29, 2019

Rising participation partly explains the sharp unemployment rate rise.

The unemployment rate in February surprised to the upside, yet there were positive labor market signs. The national unemployment rate picked up to 11.8%, from 10.8% one year ago, coming in above our 11.5% forecast. The deterioration was mainly due to the urban component with the unemployment rate spiking to 12.4%, above the 11.9% print last year and the market consensus of 12.1% (Itaú: 12.0%). In the quarter ending in February, the total unemployment rate was 11.4%, up 1.0pp over twelve months, with the urban unemployment rate reaching 12.3%, above the 11.7% one year ago. Once adjusted for seasonal factors, the total unemployment rate in the quarter was 10.4%, edging up from the 10.1% in 4Q18 (9.5% in 3Q18). However, as the participation rate also increased notably an d employ ment growth accelerated, labor market conditions are likely improving as the economy consolidates its recovery.

Rising participation partly explains the sharp unemployment rate rise. Compared to the quarter ending in February 2018, the participation rate increased 0.5pp to 64.1%, as labor force accelerated to 2.1% yoy from 0.6% in 4Q18. On the other hand, employment growth accelerated to 0.9% yoy, the highest growth rate since September and follows the 0.1% fall in 4Q18. Additionally, there was a job composition improvement. In the quarter ending in February, 198 thousand jobs were created nationwide over a 12-month period, with 122 thousand coming from urban areas. The creation in the latter was led by construction (+45 thousand), commerce (28 thousand), manufacturing (27 thousand) and utilities (22 thousand), while real estate led job shedding. Overall, private salaried jobs increased 0.3% yoy comp ared to the 1.1% decline in 4Q18, while public salaried post increased 10.1% (1.9% in 4Q18). Meanwhile, self-employment growth slowed to 1.1% from 2.5% in 4Q18.

The gradual economic recovery is expected to filter through to a more dynamic labor market.A mildly expansionary monetary policy, improving business sentiment and positive signs for investment would support growth of 3.3% this year (from 2.7% in 2018) and lead to some tightening of the labor market.

Miguel Ricaurte
Carolina Monzón

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