The unemployment rate rose back to double-digits in December, with employment dynamics weakening at the margin. The unemployment rate (SA) rose sequentially by 0.5pp in December from November to 10.8% (up from a cycle low of 9.4% in August). Sequentially, total employment fell by 0.9% MoM/SA from November, and fell 1.8% from 3Q to 4Q23 as the labor market gradually loosens. The headline national unemployment rate reached 10%, 0.3pp down over one year, while the urban unemployment rate came in at 10.2% in December (-0.6pp over one year), above the Bloomberg market consensus and our call of 9.2%. Employment expanded 1.8% yoy in December (down from +3.1% previously), while the labor force rose by 1.5% (+2.6% previously). The participation rate remained stable from December last year at 63.8%. The lagged effects of a strong economic recovery in 2021 and 2023 led to a 10.2% national unemployment rate during 2023, down 1.1pp from 2022, but the softening of domestic demand is reflected in a gradual deterioration of the labor market towards the end of 2023.
Private salaried jobs continued to drive employment dynamics. During 4Q23, employment increased 2.3% yoy (4.3% in 3Q), pulled up by private salaried posts (+3.2% yoy; +5.8% in 3Q23), and self-employment increased by 2.5% (2.8% in 3Q). Public sector jobs contracted by 0.8% in 4Q (+1.3% in 3Q). Hotels and restaurants, transportation and manufacturing were key job drivers over twelve months.
We expect the average unemployment rate to inch up to 10.5% in 2024, up from 10.2% in 2023 (11.2% in 2022). Contractionary monetary policy, a higher than expected minimum wage increase and weak activity dynamics lead us to expect further labor market loosening ahead.
