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Employment growth consolidates

The unemployment rate for 1Q24 came in at 8.7%, in line with the BBG consensus (Itaú: 8.8%). The unemployment rate implies a 0.1pp fall over one-year despite the participation rate increasing 1.4pp (to 62.4%, the highest since March 2020). The annual change is below the +0.6pp during 4Q23, and is the first decline since the quarter ending in October 2022. At the margin, employment grew 0.3% MoM/SA, the seventh consecutive increase, while the labor force rose 0.2%. The seasonally adjusted unemployment rate fell for the fourth consecutive month to 8.5% (from a cycle peak of 9% in the November quarter). The survey data continues to suggest that the bulk of the labor market adjustment has already unfolded, although complementary information such as weak job openings, rising unemployment insurance beneficiaries, and high firm layoffs continue to imply that further adjustment may still be underway.


The annual job creation was led by private salaried posts, but informality ticked up. Overall employment rose 3.4% yoy, up from 2.9% in 4Q23, while the labor force rose 3.2%. Total salaried posts increased 3.9% YoY during the quarter (2.7% in 4Q), as public salaried job growth slowed to 1.2% (+7.2% in 4Q), but the private category accelerated to 4.4% (1.8% in 4Q). Self-employment increased by a more moderate 1.1% (6.1% in 4Q). In terms of economic sectors, job growth was lifted by commerce, public administration, in households, and education. In line with private sentiment indicators, the adjustment to the construction industry seems complete, with employment levels broadly stable over one year, while up 7% from the October 2023 cycle low. Overall, formal employment increased 2.4% YoY (2.6% in 4Q), while informal jobs increased by 5.8% YoY (3.5% in 4Q). The informality rate increased to 28.1% (28.3% average during 2018-19), rising 0.7pp over one year. From 4Q23 to 1Q24, the job creation was led by informal posts.


Our Take: We expect the unemployment rate to average 8.6% this year, down 0.1pp from 2023. Improving sequential job creation dynamics, along with nominal wage growth that has averaged 7.1% yoy in the last quarter pose upside risks to service inflation dynamics (building on the risks from CLP pass-through to tradable prices). The combination of upside inflation risks and the tightening of global financial conditions, should lead the Central Bank to continue to ease the pace of rate cuts (to 50bps in May 23, taking the policy rate to 6%).


Andrés Pérez M.

Vittorio Peretti  

Ignacio Martinez Labra