The unemployment rate surprised to the downside in August, moving deeper into one-digit terrain. The national unemployment rate reached 9.3%, 1.4pp down over one year, while the urban unemployment rate came in at 9.6% in August (-1.2pp over one year), below the Bloomberg market consensus of 10.2% and our 10% call. Total employment expanded 4.5% yoy in August (5.1% previously), while the labor force rose 3.0% (3.5% in July). The participation rate increased 1.0pp from August last year to 64.4%. At the margin, total employment decreased by a mild 0.1% MoM/SA from July (+0.4% previously), but still led to the lowest unemployment rate since November 2016.
Private salaried jobs continued to drive employment dynamics. In the quarter ending August, employment increased 4.8% yoy (3.3% in 2Q), supported by growth in private salaried posts (7.1% yoy; 6.2% in 2Q23). Self-employment increased 2.8% (1.8% in 2Q), while public sector jobs fell 3.9% yoy (1.8% drop in 2Q). Manufacturing, hospitality and agriculture sectors were key job drivers in August.
While the labor market continues to perform favorably, the effects of a prolonged contractionary monetary policy will likely result in some loosening ahead as the economy cools. We expect the average unemployment rate to reach 10.3% this year, down from 11.2% in 2022 (10.9% in 2019).