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We may have reached a turning point.
2024/02/27 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

The unemployment rate fell sequentially to 8.8% (SA) in the quarter ending in January, 0.1pp down from 4Q23, while in line with 3Q23. The official unemployment rate (NSA) came in at 8.4%, below both the Bloomberg market consensus and our call of 8.6%. The January print was 0.4pp higher over one year (but lower than the 0.7pp average increase in 3Q and 4Q23). Employment rose by 0.3% MoM/SA in January, increasing sequentially for the fifth consecutive month (+0.2% in December), while the labor force rose increased 0.1% MoM/SA (0.2% in December). The participation rate in the period rose to 62.1% (up 1.5pp over one year to the reach the highest post-pandemic rate; 62.5% average during 2015-19). Employment growth continues to surprise, growing 2.9% YoY (in line with 4Q23, while up from 2.0% in 3Q23). The recent improvement in the labor market, along with the meaningful CLP depreciation and repricing on the Fed's easing cycle may lead to a less aggressive easing cycle by the BCCh as the year unfolds. 


Annual job gains were widespread, supported by favorable private salaried job dynamics. Total salaried posts increased 2.9% YoY during 4Q (2.7% in 4Q), with public salaried jobs increasing by a milder 3.7% (7.2% in 4Q), while the private category rose 2.8% (1.8% in 4Q). Self-employment increased by 5.6% (6.1% in 4Q). In terms of economic sectors, job growth was lifted by commerce, healthcare, and manufacturing, while construction, real estate concentrated job losses (sustaining the view of weak investment in the sector), along with financial and insurance services. Overall, formal employment increased 2.5% YoY (2.6% in 4Q), while informal jobs rose 4.0% YoY (3.5% in 4Q). The informality rate increased to 27.6% (28.3% average during 2018-19), rising 0.3pp over one year.  


Although the labor market continues to show slack, we may have reached a turning point. The unemployment rate has surprised with a better-than-expected record for the third consecutive month, indicators of labor demand have improved (from low levels), administrative records show a slowdown in the destruction of formal jobs, while real wages have increased above of 3% year-on-year, favored by the drop in inflation. All in all, we expect the unemployment rate for the year to reach 8.6% (-0.1pp from 2023), as the economy gradually recovers (1.7%; -0.2% in 2023).