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Labor market slack to increase.
2023/10/31 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

The unemployment rate surprised to the downside in 3Q23 falling to 8.9% (9.0% in the quarter ending in August), above both the Bloomberg market consensus and our 9.1% call. The unemployment rate was 0.9pp above the same quarter last year. On a seasonally adjusted basis, the unemployment rate remained unchanged from the previous month at 8.8%. After contracting sequentially in the previous print, job creation rose by 0.1% MoM SA in September, even though the formal job creation subsidy expired (IFE Laboral). Separately, the labor force rose again by 0.1% MoM/SA (0.1% in August), as downbeat economic momentum appears to be pushing more people back to the labor market. Total employment grew 2% YoY (1.7% in August; 2.2% in 2Q23) was driven by formal job posts (2.6% YoY). While labor market data was better than expected in September, we expect gradual deterioration to continue, leading to even greater slack.



Annual job gains were driven by salaried posts – both public and private. Employment increased 2.0% YoY in the 3Q23 (1.7% in August and 2.2% in 2Q23), with salaried posts driving positive gains. Public salaried posts rose by 6%, likely reflecting transitory job posts related to the Pan-American games (4.6% in August), while private salaried posts rose by 2.8% (4.6% in August). Self-employment increased by 0.9% (2.4% in August). In terms of economic sectors, job growth was lifted by commerce, public administration and health, while construction concentrated job losses (sustaining the view of weak investment in the sector). Formal employment increased 2.6% YoY (1.6% in August), while informal jobs grew 0.6% YoY (1.9% in August). The participation rate in the quarter reached 60.9% (up 1.2pp over one year; 62.5% average during 2015-19).


Labor market slack to increase. Even though September’s labor market data was better than expected, we believe it is a transitory improvement, likely related to one-offs such as the hiring of staff for the Pan-American Games. In fact, complementary data points to the persistence in labor market weakness. According to the Pension Superintendent, the number of unemployment insurance (UI) beneficiaries rose by 36% YoY in August, leading to a nominal increase in monthly payouts of 49.2% YoY. Labor demand is expected to remain subdued, with the BCCh’s index of online job postings (a proxy for labor demand), falling by 35.5% YoY in September (-37.3% in August), still well below pre-social unrest levels. We expect the unemployment rate to average 8.8% this year (7.9% in 2022).