Itaú BBA - COLOMBIA – Weak labor market in 2Q19

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COLOMBIA – Weak labor market in 2Q19

julio 31, 2019

In 2Q19, the participation rate dropped to the lowest level since 2Q10, containing a further surge in the unemployment rate

In the month of June, the annual rise in the national unemployment rate (+0.3pp to 9.4%) was more subdued than expected, partly due to falling participation rates and a bounce back in urban job creation (the first positive print since February). The urban unemployment rate declined to 10.7% (11.1% one year earlier), well below both the Bloomberg market consensus and our estimate of 11.7% as employment grew 1.2% YoY (1.2% drop in May). Nevertheless, the labor market as a whole is shedding jobs and declining participation suggests a level discouragement in the possibility of being absorbed into the job market.

In 2Q19, the participation rate dropped to the lowest level since 2Q10, containing a further surge in the unemployment rate. The national unemployment rate came in at 10.1% in 2Q19, rising 0.7pp over twelve months, with the urban component picking up 0.4pp to 11%. Total employment fell 1.6% YoY (363 thousand jobs shed), deteriorating from the 0.5% gain in 1Q19 and the sharpest decline since 2007. Leading the job destruction was self-employment (-4.4% in 2Q19; -0.9% in 1Q19) as well as public salaried posts (-10.7%). On the positive front, the creation of private salaried jobs gained momentum (3.6% yoy vs 1.6% in 1Q19). Job shedding was led by farming, but the destruction was broad-based with only significant gains seen in construction.

The overall labor market weakness, in conjunction with depressed consumer sentiment, hints at contained consumption support.
 

Miguel Ricaurte
Carolina Monzón

 



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