Itaú BBA - COLOMBIA – Labor market recovery continues in October

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COLOMBIA – Labor market recovery continues in October

November 30, 2020

Self-employment leads job recoveries, but private salaried posts are also posting gains

The urban unemployment rate came in at 16.8% in October, up 6.4 pp from one year ago, but far milder than the 11.7pp average increase over the prior six months. The unemployment rate came in below our 17.4% call and the 17.5% Bloomberg market consensus. The moderating unemployment rate is unfolding amid improving labor market participation, underscoring that the worst of the shock to the labor market has passed. In fact, urban employment rose 3.7% from September, and over 2/3 of jobs lost at the peak of the crisis (April) have been recovered. Overall, the national unemployment rate rose 4.8pp to 14.7% in October (+5.5pp to 15.8% in September; 21.4% cycle peak in May). Going forward, improving dynamics in urban areas, most affected by distancing measures, the fiscal and monetary stimulus, and a benign global environment will likely help consolidate the labor market recovery. 

The labor market improvement is primarily led by self-employment, but private salaried posts are also showing some gains. In the quarter ending in October, the national unemployment rate rose 5.4pp over twelve months to 15.7% (20.5% at the cycle peak in July), with the urban component picking up 7.6pp to 18.2% (24.7% in July). There was a 13.4% YoY contraction of private salaried jobs, moderating from the 18.4% drop in 3Q20 and the 25.5% fall in 2Q20. Meanwhile, self-employment declined a milder 3.7% YoY (6.7% fall in 3Q and 17.9% in 2Q20). Public salaried posts recorded the first gain (+0.8% YoY in the quarter; 8.1% down in 3Q20) since April 2019. 

The significant economic shock will likely result in the average unemployment rate for 2020 reaching 16.5%, well above the 10.5% recorded in 2019. Despite the high unemployment rate, the recently seen recovery dynamics is encouraging.

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