Itaú BBA - CHILE – Labor market weakening begins

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CHILE – Labor market weakening begins

Novembro 29, 2019

The greater Santiago data better reflects the impact of recent events.

Although the national unemployment rate in the quarter ending in October ticked down 0.1pp over twelve months to 7.0%, data from the Santiago region better reflects the effects from widespread protest action. The national unemployment rate came in below our 7.4% call and the Bloomberg market consensus of 7.2%, partly explained by participation rates dropping 0.4pp, compared to the 0.2pp increase in 3Q19. Total employment grew 1.2% yoy in the quarter, slowing from 2.1% in 3Q19 (1.0% in 2Q19), while the labor force growth was a milder 1.2% (2.1% in 3Q19; 1.0% in 2Q19). Given Chile’s labor market data is reported for the rolling quarter, the protests during the backend of October are only partly reflected in today’s release. A clearer picture of the effect will become evident for the 4Q19 data, for which we preliminary see the unemployment rate rising to around 8% (6.7% in 4Q18). Nevertheless, in the greater Santiago area, the country’s economic hub and epicenter of the recent events, employment growth nearly halted at 0.2% (1.5% in 3Q19), leading to unemployment edging up 0.6pp over twelve months to 8.1%, better reflecting how the disruptions would impact labor market dynamism.

In the quarter ending in October, the recent boost from salaried payroll growth moderated. Private salaried employment increased 0.8% yoy in October, down from 1.5% in 3Q19, while the same dynamic unfolded for public salaried job posts (4.9% yoy vs. 6.7% in 3Q19). Meanwhile self-employment growth remains mild at 0.8% (0% in 3Q19 and +2.6% in 2Q19). Overall, job growth was boosted by mining, construction, commerce, transportation and health services, while manufacturing was the key drag.  

Labor market loosening ahead is likely as private expectations deteriorate and growth slows. How this transfers through to the unemployment rate will depend greatly on how participation levels evolve.

Miguel Ricaurte
Vittorio Peretti

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