Itaú BBA - COLOMBIA - Weaker labor market than headline number suggests

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COLOMBIA - Weaker labor market than headline number suggests

April 28, 2017

Recent activity indicators signal slowing activity economy that could deteriorate job quality even further

Labor market data for 1Q17 showed mixed signals with loosening in the urban areas being partly countered by the recovery in rural agricultural employment following the end of El Niño. The national unemployment rate for 1Q17 came in at 10.6%, down from the 10.7% recorded one year earlier, meanwhile the urban unemployment rate ticked up 0.2 percentage points to 11.7%. However, once corrected for seasonal factors, both measures increased from 4Q16. In turn, the labor market participation dropped 0.8 percentage points in urban areas over the last 12-months reaffirming the weakening of the labor market (national participation dropped 0.3 points).

Employment growth is diverging between rural and urban areas. National employment growth picked up to 0.9% year over in 1Q17 (0.4% in 4Q16). Of the 202 thousand jobs created nationally, manufacturing contributed 123 thousand while agricultureadded 89 thousand. The recent weakening of manufacturing activity and the deteriorating industrial confidence suggest that strong growth in manufacturing employment may not persist. Construction was the main sector shedding jobs (60 thousand), while the public sector employment is shrinking as the fiscal consolidation unfolds (-11.9% yoy vs. +0.7% in 4Q16). Private salaried employment picked up to 2.6% (0.5% in 4Q16), while self-employment growth slowed to 2.2% (2.9% in 4Q16). In contrast to the national scale, urban employment only added 6 thousand jobs, reflecting a slowdown of job growth to 0.1% (0.4% in 4Q16). This could be indicative thatthe end of last year’s El Niño weather phenomenon is responsible for the rural employment pickup.

We expect the labor market to loosen in upcoming months. Recent activity indicators signal slowing activity economy that could deteriorate job quality even further and maintain a low rate of job creation.


 

Miguel Ricaurte

Vittorio Peretti



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