Itaú BBA - COLOMBIA – Unemployment rate increases further, despite stronger job creation

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COLOMBIA – Unemployment rate increases further, despite stronger job creation

abril 30, 2019

While there are some positives, the labor market remains weak

The labor market showed mixed signals at the start of the year. The national unemployment rate increased to 10.8% in March (from 9.4% one year ago), driven by the 1.4pp rise in the urban rate to 12.0% (above market expectations of 11.1% and our 11.7% forecast). Therefore, the national unemployment rate came in at 11.8% in the first quarter of 2019 (10.4% one year earlier), while the seasonally adjusted series moved up 0.4pp from 4Q18 to 10.5% (mainly explained by a deterioration of the rural component). Part of the rise in the unemployment rate was the increase in the national participation rate over twelve months (+0.3pp), the first annual increase since 2Q17. On a positive note, this development may reflect increased belief of finding employment, in line with the gradual activity recovery. Additionally, the composition of job growth is favorable, with rising salaried posts. Regardless, the labor market remains loose and increasing inflationary pressures from the wage front are unlikely for now. With growth still below potential and inflation expectations anchored, the central bank will likely retain its neutral stance and leave the policy rate at 4.25% throughout the year.  

Job creation picked up and the composition improved. In 1Q19, total employment grew 0.5% yoy, recovering from the 0.1% drop in 4Q18, but was unable to fully offset the labor force increase of 1.8% yoy (from 0.6% in 4Q18). Leading the creation of new jobs was private salaried posts (1.6% yoy, -1.1% 4Q18), while salaried public jobs grew 11.6% yoy (1.9% in 4Q18). On the other hand, self-employment growth contracted 0.9% yoy, deteriorating from the 2.5% rise in 4Q18. 

Overall, while there are some positives from the data (job composition in particular), the labor market remains weak

Miguel Ricaurte
Carolina Monzón

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