COLOMBIA – Labor market dynamics remains solid in July

Employment increased sequentially, and the unemployment rate remained at historically low levels. According to DANE’s July labor market report, the national unemployment rate reached 8.8%; down 1.1pp over one year, while the urban unemployment rate stood at 8.4% in July, a drop of 1.8pp over one year, in line with the Bloomberg market consensus of 8.4% and slightly above our 8.3% call. Employment rose by 3.3% YoY in July (+3.6% in June), while the labor force increased by 2.1% (+1.7% in the previous month). The participation rate increased by 0.4pp from July 2024 to 64.6%. Sequentially, employment rose by 0.4% (+0.7% previously), while the unemployment rate (SA) increased by a mild 0.1pp from June to 9.0%. In contrast, the urban unemployment rate (SA) dropped to 8.3% (-0.1pp MoM; BanRep’s NAIRU: 10.2%).

 Self-employment and private payrolls continued to be key drivers of job growth. In the quarter ending in July, employment increased by 3.2% YoY (+3.1% in the second quarter of 2025). This annual increase was driven by a 4.4% YoY increase in self-employment (+5.7% in 2Q25), while private salaried posts rose by 4.3% YoY (+2.7% in the previous quarter). Conversely, public sector jobs fell by 3.1% (-0.8% in Q2 2025). The hotel and restaurant sector, construction, and professional, scientific and technical activities were key job drivers this month.

Our take: The labor market remained solid in July.We foresee an average unemployment rate this year of 9.0% for 2025 (10.2% in 2024). A tight labor market, combined with elevated inflation and fiscal uncertainty restricts BanRep’s ability to pursue monetary easing in near term.