Itaú BBA - COLOMBIA – Job destruction in 4Q18

Macro Latam

< Back

COLOMBIA – Job destruction in 4Q18

January 31, 2019

Our expected activity recovery this year in part depends on a labor market recovery

The unemployment rate in the month of December surprised to the upside, as urban labor dynamics deteriorate. The national unemployment rate picked to 9.7%, 1.1pp up from the close of 2017. The urban unemployment rate rose to 10.8% (9.9% one year earlier), 0.2pp higher than our forecast and 0.7pp above the Bloomberg market consensus. In 2018, the total unemployment rate ticked up from 9.4% in 2017 to 9.7%. Falling urban participation and job destruction at the back end of 2018 reflects a weak labor market that poses a risk to the expected consumption recovery. Additionally, pessimistic consumer sentiment, an activity recovery that has not consolidated, anchored inflation expectations and a risky external environment favored the central bank keeping the policy rate steady at 4.25% today.

Urban job shedding took place in the final quarter of 2018. The national unemployment rate rose to 9.2% in 4Q18, 0.7pp higher than 4Q17, while the urban unemployment came in at 10.3%, from 9.6% one year earlier. Once adjusted for seasonal factors, the total unemployment rate in the quarter was 10.1%, 0.6pp up from 3Q18 and the highest since 1Q13, while the urban rate following a similar evolvement. Total employment fell 0.1% yoy in 4Q18 (+1.1% in 3Q18), in line with the urban breakdown, falling to offset the 0.6% rise in the labor force (1.2% in 3Q18). The job destruction was led by the 12.6% decline in non-paid family workers (-11% in 3Q18), along with the private salaried job declining 1.1% yoy (-0-5% in 3Q18). Meanwhile, public salaried jobs grew 1.9%, improving from the 0.2% gain in 3Q18 and self-employment rose 2.5% (similar to 3Q18). Commerce and real state were the sector that led the job shedding.

We expect growth of 3.3% this year, picking up from 2.6% expected for 2018. Our expected activity recovery in part depends on a labor market recovery. Low interest rates, higher real wages (as inflation is low) and some recovery of oil prices would likely aid the rebound from last year.

Miguel Ricaurte
Carolina Monzón


< Back