Itaú BBA - COLOMBIA – Urban unemployment picks up in July

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COLOMBIA – Urban unemployment picks up in July

August 31, 2017

Deteriorating urban labor market dynamics will likely limit a consumption recovery

Rural employment is keeping the total unemployment rate subdued, as the divergence between urban and rural labor dynamics widens. We see the frail urban labor market, which accounts for two thirds of private salaried employment nationwide, as a sign of weakness of the economy. Furthermore, the recovery of rural employment could be due to temporary factors (namely the recovery from last year’s El Niño weather phenomenon). The national unemployment rate came in at 9.7%, broadly stable from one year before (9.8%). Once adjusted for seasonal factors, the unemployment rate for the quarter ending in July came in at 9.2%, in line with 2Q17. In the same period, the urban unemployment rate rose to 10.8%, from 10.6% in 2Q17 and 10.5% in 1Q17. Meanwhile, the rural unemployment rate was stable from 2Q17 at 7.8% (but down from the 8.4% in 1Q17).


Total national employment picked up 1.8% year over year in the quarter ending in July (2.0% in 2Q17 and 0.9% in 1Q17). Of the 396 thousand jobs created, agriculture & fishing sectors had the largest contribution (198 thousand). Meanwhile, commerce shed jobs for the fifth consecutive month (-105 thousand) and construction declined further (-10 thousand). Job creation was concentrated in rural areas (337 thousand), while urban employment creation (+58 thousand) remains at historically low levels. Job growth is of low quality with self-employment continuing to lead job gains, increasing 2.2% year over year at the national level (2.4% in 2Q17 and 2.2% in 1Q17), while private salaried employment growth came in at 1.0% (0.8% in 2Q17 and 2.6% in 1Q17). Meanwhile, the fiscal consolidation continues to lead to declining employment in the public sector. Public employment dropped 4.8% over the last 12 months (-2.1% in 2Q17 and -11.9% in 1Q17).

We see the total unemployment rate averaging 9.0% this year (9.2% last year), brought down by the performance in the rural environment. The deterioration of the labor market dynamics in urban areas (where formal employment is more prevalent) will likely limit support for a consumption recovery ahead.


Miguel Ricaurte

Vittorio Peretti

 

 



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