Itaú BBA - CHILE – Bitter sweet labor market data in 4Q19

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CHILE – Bitter sweet labor market data in 4Q19

Janeiro 31, 2020

We expect the full impact of the recent events on the labor market to be reflected in coming months

Unemployment grew in the final quarter of 2019 amid widespread protest action, but milder than expectations. The unemployment rate increased 0.3pp over twelve months to 7.0%, below the Bloomberg market consensus of 7.2% and our 7.6% call. As a result, average unemployment for 2019 was in line with the prior year at 7.0%. Total employment growth slowed to 1.0% yoy 4Q19, from 2.1% in the 3Q19 (1.4% in the quarter ended in November), while the labor force growth was 1.2% yoy (1.5% one month before and 2.1% in 3Q19). Participation fell 0.4pp over twelve months to 59.3%, compared to the 0.2pp increase in 3Q19 prior to the protests. In the greater Santiago area, the loosening of the labor market is more evident as employment growth moderated to 0.8% (1.5% in 3Q19), leading to the unemployment rate rising 0.6pp to 8.0%.

By the end of 2019, job creation was boosted by self-employment, reflecting the deteriorating dynamics of the labor market. Self-employment grew 4.7% (0% in 3Q19 and 1.0% in November), the highest rate since May 2018, while private salaried employment growth slowed sharply to 0.3% yoy (1.5% in the 3Q19). Growth of public salaried posts also moderated (to 2.4%, the lowest reading since March 2017). Overall, job growth was lifted by commerce, health services, and mining, while information services and manufacturing were the key job destructors.

Labor market weakening would unfold ahead. We expect the full impact of the recent events to be reflected in coming months as low private sentiment hampers job opportunities, resulting in job creation of lower quality and the unemployment rate increasing to 8.5% this year.

Miguel Ricaurte
Vittorio Peretti

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