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Annual job gains were widespread, but with a growing informality share.
2024/01/22 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

The unemployment rate fell sequentially to 8.9% (SA) in the quarter ending in December, falling slightly from 9% in the November quarter, but 0.1pp up from 3Q23. The official unemployment rate (NSA) came in at 8.5% in December, below the Bloomberg market consensus of 8.6% (Itaú: 8.8%). The 4Q23 print was up 0.6pp over one year. Employment rose by 0.2% MoM/SA in December, increasing sequentially for the fourth consecutive month (+0.5% in November), while the labor force rose increased 0.2% MoM/SA (0.6% in November). The participation rate in the period rose to 61.8% (up 1.6pp over one year to the reach the highest post-pandemic rate; 62.5% average during 2015-19). Employment growth continues to surprise (2.9% YoY, 2.0% in 3Q23), yet lifted by informal job posts (+3.5% YoY), while formal jobs rose by 2.6%. During 2023, the average unemployment rate rose to 8.7% (Itaú: 8.8%), up from 7.9% in 2022. Even though INE’s unemployment data was better than expected towards the end of 2023, we believe labor market slack should continue to build in the following quarters, as suggested by administrative data and other surveys.  


Annual job gains were widespread, but with a growing informality share. Salaried posts increased 2.7% YoY during 4Q (2.8% in 3Q), with public salaried posts increasing by 7.2% (6% in 3Q), while the private category rose by 1.8% (2.1% in 3Q). Self-employment increased by 5.9% (0.9% in 3Q). In terms of economic sectors, job growth was lifted by healthcare, public administration and commerce, while construction concentrated job losses (sustaining the view of persistent weak investment in the sector). Formal employment increased 2.6% YoY (2.6% in 3Q), while informal jobs rose 3.5% YoY (0.6% in 3Q). The informality rate reached 27.5% (28.3% average during 2018-19), rising 0.2pp over one year.  


We expect labor market weakness to persist in the short term. According to Chile’s Pension Superintendent, the number of unemployment insurance beneficiaries rose by 17.8% YoY in November (+28% in October). Rising beneficiaries, and a decline in the number of contributors to the pension system, are consistent with the rise in layoffs as reported by administrative records, reflecting the weakness in the labor market. Labor demand remains well below pre-pandemic levels. While interest rates and inflation are falling, business sentiment remains downbeat, suggesting a hiring acceleration appears unlikely in the near horizon. Labor market weakness, and low inflationary pressures are in line with our expectation that the central bank cuts rates tomorrow by 100bps to 7.25%.