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Private salary dynamics weaken.

During the first quarter of the year, employment increased 0.8% QoQ/SA, but a swifter rise in the labor force is increasing the unemployment rate. Over twelve months, employment increased 2.4% YoY (3.3% in 4Q22), lifted by salaried posts, while self-employment gained relevance. The labor force grew 3.5% YoY (4.1% in 4Q22), leading to an unemployment rate of 8.8% (+1pp over one year; +0.7pp in 4Q22) and higher than market consensus of 8.7% and our call of 8.6%. On a seasonally adjusted basis, the unemployment rate rose 10bps from 4Q22 to 8.5%. Employment sits 0.5% below pre-pandemic levels (SA) while the labor force participation rate rose to 61% (+1.5pp from 1Q22), as it gradually edges back to the 63% pre-Covid level. 




The bulk of the employment increase over twelve months continued to be pulled by formal jobs, mainly in the public sector, but informal posts are becoming more relevant to job growth. Health, education and public administration were key job drivers, while construction remains a notable drag. The 2.4% YoY employment increase was lifted by public salaried posts (8.6% YoY; in line with the acceleration of fiscal expenditure seen in recent months), while private salaried jobs rose a milder 1.0% YoY (6.0% in 4Q22). Self-employment rose 3.7% YoY (recovering from the 2.3% fall in 4Q22). Formal employment increased 2.1% YoY, down from 4.6% in 4Q, while informal jobs grew 3.1% YoY (null variation in 4Q). The informality rate sits at 27.4% (27% average in 2019-21).


The labor force recovery is gradually taking place, as households have used up their savings and high inflation bites. If the participation returns to the pre-pandemic average, the unemployment rate would be slightly above 10%, ceteris paribus. Moreover, a cooling economy, with falling labor demand not indicating significant needs or willingness to significantly expand hirings, point to a further unemployment rate rise ahead. The Government has proposed a significant 22% nominal minimum wage increase between May-23 and July-24. We expect the unemployment rate to average 8.8% this year (7.9% in 2022), but risks tilt to a larger increase.

Andrés Pérez M.

Vittorio Peretti 

Ignacio Martinez Labra