Itaú BBA - COLOMBIA – Still unfavorable labor market dynamics in July

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COLOMBIA – Still unfavorable labor market dynamics in July

August 31, 2020

As the mandatory quarantine was extended until the end of August, the labor market recovery is set to be gradual

As the lockdown of the Colombian economy persisted through July, albeit with increasing flexibility, the labor market remained weak. The urban unemployment rate came in at 24.7% in July, up 14.3pp from last year (14.1pp increase in June), in line with our 25.0% forecast (Bloomberg market consensus of 23.9%). Meanwhile, the national unemployment rate rose 9.5pp to 20.2% in July, moderating from the 10.4pp year over year rise in June, reflecting that the bulk of the labor market weakness is occurring in key metropolitan areas. Total employment contracted 18.8% yoy in July (4.2 million job losses), similar to the drop in June, but milder than the 24.5% peak recorded in April. Labor market participation retreated 6.5pp from last year to 56.5%, containing a further surge in the unemployment rate, but reflective of the job market difficulties. As the mandatory quarantine was extended until the end of August, the labor market recovery is set to be gradual.



In the quarter ending in July, the national unemployment rate rose 10.3pp over twelve months to 20.5%, with the urban component picking up 13.9pp to 24.7%. Job destruction was widespread in the quarter. There was a 7.3% yoy contraction of public salaried jobs (-3.6% drop in 2Q20), a 15.0% self-employment decline (17.9% fall in 2Q20) and a 24.4% shedding of private salaried posts (25.5% down in 2Q20). Commerce led the job shedding (-798 thousand jobs; -18.9% yoy), but job destruction was broad-based across sectors (mild gains were only seen in the utilities and mining sectors), in line with dampened consumption dynamics.  

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We expect the unemployment rate to average 17% this year, up from 10.5% last year, with risks tilted to the upside if the economic recovery in 2H20 underwhelms. Monetary and fiscal response will support an activity recovery next year that would transform into a mild labor market recovery (average unemployment rate would come down to 14%).

Miguel Ricaurte
Carolina Monzón



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