Itaú BBA - COLOMBIA – Disjointed labor market ahead of dual shock

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COLOMBIA – Disjointed labor market ahead of dual shock

Março 31, 2020

The shock expected to hit activity this year would lead to some labor market loosening

The February national unemployment rate increased 0.4pp over twelve months to reach 12.2%, despite the urban rate falling by nearly a full percentage point. The urban unemployment rate came in at 11.5% in February, below the Bloomberg market consensus and our 11.7% call, as job growth remained upbeat at 2.5% (2.8% in January; 0.3% in 2019). In the quarter ending in February, the total unemployment rate was 11.5%, up 0.1pp over twelve months, notwithstanding the urban unemployment rate edged down 0.6pp to 11.6%. The labor market developments in urban zones is in line with a preceding period of activity recovery and elevated business confidence levels. However, the signs of a labor market improvement would likely be countered by the expected activity slowdown due to the coronavirus outbreak and oil price collapse.

Private-salaried posts have been a key job driver, but are expected to unwind going forward. National employment fell 0.5% yoy in the quarter (0.1% drop in 4Q19), while the participation rate fell by a more notable 1.1pp over twelve-months to reach 63.1% (0.6pp drop in 4Q19 to 63.8%). Private salaried posts grew at a milder 2.2% (3.1% in 4Q19), while self-employment was a key job destroyer (3.0% drop vs. -2.0% in 4Q19) and public salaried posts continued to shrink (-3.0% vs. -5.3% in 4Q19). By sector, job shedding was concentrated in farming, commerce, and the public sector, while gains in restaurants, hotels, and construction limited the job total decline. In the same period, urban job growth was 2.3% (1.4% in 4Q19) and participation was broadly flat at 66.0%.

The significant shock expected to hit activity this year would likely lead to some labor market loosening from the 10.5% unemployment rate recorded last year. We expect activity to contract 0.4%, from the near potential 3.3% posted in 2019, amid low oil prices, weakened global demand and the domestic mitigating measures that would dampen internal demand.


 

Miguel Ricaurte
Carolina Monzón



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