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Labor demand is likely to cool ahead due to the anticipated economic slowdown.

A sequential employment increase and falling participation supported a lower unemployment rate in February. The national unemployment rate fell to 11.4%, down by 1.6pp over one year. The urban unemployment rate also fell, to 11.5%, down 1.2pp from last year. The urban unemployment rate was below the Bloomberg market consensus of 13.1% and our 13% call. Total employment expanded 2.5% yoy in February (+3.8% previously) while the participation rate fell 0.4pp from February last year to 63.8%. At the margin, total employment expanded 0.7% MoM/SA from January, building on the previous increase of 0.5% MoM/SA.

Private salaried employment led job gains. In the quarter ending February, employment increased 3.6% yoy (5.8% in 4Q and 8.0% in 3Q22), pulled up by private salaried posts (6.3% yoy; 14.2 in 4Q22) while government employment fell 1.6% yoy (9.7% drop in 4Q) and self-employment slightly increased 0.9% yoy (0.6% decline in 4Q). The labor force grew by a more moderate 2.3% yoy (3.8% in 4Q22). During the quarter, the unemployment rate came in at 11.8% (12.9% one year earlier). 

We expect the average unemployment rate to reach 11.6% this year (11.2% in 2022; 10.9% in 2019). Looking ahead, labor demand is likely to cool due to the anticipated slowdown in economic activity.

Vittorio Peretti 
Carolina Monzón