Itaú BBA - COLOMBIA – Labor market dynamics improve in August

Macro Latam

< Back

COLOMBIA – Labor market dynamics improve in August

September 30, 2020

The gradual reopening of the economy aided self-employment.

The urban unemployment rate came in at 19.6% in August, up a significant 8.2pp from one year ago, but far milder than the 13.5pp average increase over the prior four months, indicating that the worst of the crisis is behind the Colombian economy. The unemployment rate came in below our 24.7% call and the 24.3% market consensus. Additionally, the participation rate decline in urban areas moderate (to 3.8pp from last year, compared to a 7.4pp average between April and July), showing that the falling unemployment rate at the margin was linked to job gains (8.4% MoM). Self-employment benefitted from the beginning of the gradual lift-off of distancing measures. On annual terms, urban employment shrunk 13.4% yoy, significantly lower than declines exceeding 20% in the four previous months. Overall, the national unemployment rate rose 6.0pp (10.4pp in July) from last year to reach 16.8%. Improving dynamics in urban areas, most affected by the crisis, bodes well for a consumption recovery. The end of mandatory quarantines in September would further consolidate the labor market recovery.

The quarterly breakdown suggests that the urban employment recovery in August was not solely self-employment, but also private salaried posts, a further positive for the consumption outlook. In the quarter ending in August, the total unemployment rate rose 8.6pp over twelve months to 18.9% (+10.2pp to 20.3% in 2Q20), with the urban component picking up 12.2pp to 23.0% (+13.3pp to 24.3% in 2Q20). Private salaried posts fell 21.0% yoy in the quarter ending in August (25.5% drop in 2Q20), accounting for nearly half of total job losses. Self-employment declined 10.8% yoy (17.9% fall in 2Q20), while public posts fell 8.1% (3.6% decline in 2Q20). Job shedding remains widespread, with double-digit annual declines registered in most sectors. Nevertheless, the clearest recoveries can be seen in manufacturing (down 17% yoy vs. 30% in 2Q20), construction (-12.7% yoy vs. 30.4% in 2Q20) and commerce (-15.8% yoy vs. 19.8% in 2Q20). The seasonally adjusted series, shows a 1.4pp unemployment rate drop from 2Q20 to 19.2% in the quarter ending in August.

Amid the significant economic shock and mobility restrictions, the average unemployment rate for 2020 will likely reach 17.0%, well above the 10.5% recorded in 2019. With the economy reopening and business sentiment back in optimistic territory, the continuance of a labor market recovery at the margin is expected.

Miguel Ricaurte
Carolina Monzón

< Back